There is a saying that states the two things that are inescapable are death and taxes holds true for vacant land investments. While you are not collecting rent and may not even have any near-term plans to generate income from your property, you will still be levied property taxes (Land tax).
Furthermore, just as with any other type of property, not paying those taxes could result in you losing it. Luckily, you can get some back-end benefit out of those property taxes.
The land tax applies to land regardless of whether or not income is earned from the land.
This is the tax levied on land-based on:
- The market value of the land.
- Value of land increases as it is serviced with good roads.
- Water, sewage system.
- Street lights and other security systems.
Once serviced the land is considered usable as zoned for settlements, industrial or agriculture.
Property Rates & Land Market Value
The market value is the price that a willing buyer is willing to pay for a property. Without property rates, the market value can often be over-exaggerated by the seller.
Property rates tend to regulate the prices for buyers and also enable a transaction to be complete. A governor and county legislative wanting to see all land developed may pass a law that based on a willing buyer and willing seller if a person whose property is not developed creates a price that no buyer can buy them the County will assess the property at the selling value created by the owner.
Even though people want the market value of their houses to go up they do not want the assessed market value that is subject to taxation to be high. This becomes the regulation system.
Any owner could lose their property for default of payments of this Property tax rates.
Property Tax Assessments
Your county’s assessor office will calculate a value for your vacant land investment just like it would for any other piece of property in the county and you will pay taxes based on that value. Since it is vacant land, it should have a significantly lower assessed value than a comparable lot that is improved, meaning that you will at least pay lower taxes.
Paying Property Taxes
Regardless of whether you are earning from your property, you must still pay your property taxes. In each county, all land parcels should be declared as ratable, with an appropriate form of rating being applied to each parcel. The Land Taxation Policy that seeks to provide a package of incentives to encourage productive and sustainable use and disincentives for keeping idle land.
Tax Treatment of Property Taxes
When you own land for investment purposes, you report your income and expenses to KRA. While you have no income on your vacant land, KRA lets you tabulate all of your operating expenses, including your property tax. You can then use those expenses to offset your profit on other pieces of investment property.
