Hi. Great Questions.
Right now, you are considered an Investor, for tax purposes.
You are entitled to deductions for many or your investment expenses as personal itemized deductions on Schedule A.
Any interest you had paid on any $'s borrowed to purchase the vacant land is investment interest that can be deducted as an itemized personal deduction. However, the annual deduction for investment interest is limited to the your net investment income for the year. Any excess is carried over to future years. You determine the amount of your net investment income by subtracting your investment expenses (other than interest expenses) from your investment income.
For example: an individual purchases a vacant lot on which he pays annual property taxes of $1,000 and interest of $2,000. His only other investment is a savings account, which earns $2,000 in annual interest. His net investment income is $1,000 ($2,000 interest income – $1,000 property tax expense = $1,000). Thus he may deduct only $1,000 of his interest expense. The excess $1,000 is carried over to future years.
You can also deduct property taxes paid on vacant land as a personal itemized deduction on Schedule A. This deduction is not limited to the amount of net investment income.
Other deductions relate to other carrying costs such as legal and accounting fees, insurance, and travel expense are also deductible on Schedule A. However, they are deductible only as miscellaneous itemized deductions. This means that they can be deducted only if, and to the extent, they exceed 2 percent of the taxpayer’s adjusted gross income.
If you turn the property into a rental property, you will be able to deduct costs from the rental income you receive, on Schedule E, as long as you are actively participating in this rental activity.
If you have any questions, let me know. Thanks.