Q: We are buying a 5 acre lot that’s next to our home. Should we keep it separate or add it to our primary address?
We are purchasing this 5 acre lot that’s attached to our primary address. Part of the lot is residual. Our primary house has two acres with it that is residual and assessed for $42,000 just the land not the house. We don’t know if this will be our forever home and want to make a wise decision as to if we should keep this lot separate, or add it to our primary. For future sales, would keeping it separate be capital gain? Because we are getting it for a terrific price.
A: You are conflating real estate law, real estate tax law, and income tax law in a way that is creating an issue that is not an issue. If the adjoining land is a separate tax lot, you will pay two tax bills. You can consolidate tax lots, but the cost of doing so will outweigh the extra 50 cents each quarter to mail in a second bill. When you sell, refi, etc., you will have two lots on one deed or mortgage. Happens all the time. No one cares. For income tax, your residence can be multiple tax lots. Residence for income tax is not measured in tax lots, which are a local designation.
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