Claiming the Sale of Vacant Land on Your Federal Tax Returns

When vacant land is sold, the sale must be filed with the Internal Revenue Service. You must report the sale on your personal federal tax return if it meets certain criteria. These include whether the land is adjacent to your primary residence, if you owned or used the land as part of your primary residence and whether the sale of your primary residence and the vacant land occurs within two years of each other.

Step 1

Calculate the profit or loss by subtracting the selling expenses from the selling price and any outstanding mortgage balances or tax liens paid out of the proceeds of the sale. Determine whether it's a profit or loss and the exact amount.

Step 2

Report the gain, if there was one, on Schedule D of the 1040 federal return form. Use line 1 if it's a short-term debt, meaning that you owned the land for one year or less. Use line 8 if it's long-term, or you owned the land for more than one year.

Step 3

Report the loss, if that's the case, on Schedule D, lines 1 or 8. The loss is not tax-deductible, but you still have to report it.

Step 4

Fill in the information associated with Lines 1 or 8 in sublines a through e. Enter the amount of your gain or 0 (zero) on subline f, if it's a loss. File the form along with your personal income tax return.

Tip

If the vacant land was used for business purposes or rented for income, you may be required to file IRS Form 4797 to report the sale of the vacant land.