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How Do Property Taxes Apply to Vacant Land?

Property Taxes on Vacant Land

When you decide to make a vacant land investment, you should be aware that taxes are inescapable.

People often think that a vacant piece of land is free from taxes since one is not collecting any rent, but this is not the case.

Land/property tax applies to any land parcel regardless of whether income is earned or not. Some may make these land investments with no near-term plans of putting the land into use for income generation but will still be levied property/land tax.

Any defaults on these property/land taxes may result to an individual losing his her property. The up-side of these taxes is that an individual can benefit out of them.

Land/ property tax is levied on the basis of amenities and infrastructure. The market value of land, as well as the value a specific piece of land is likely to accumulate also contributes to tax. Infrastructure such as the presence of good roads, water and sewerage systems, street lights and all other development structures contribute to tax.

Property rates and land market value

Market value is the amount a buyer is willing to pay for a good. The absence of property rates may result into over exaggeration of land prices by a seller. When we talk of property rates, we are simply referring to the regulations on the prices of land for buyers. They enable transactions to go through.

For instance, the county legislative and the governor may pass a law that based on a willing buyer and a willing seller, if a person whose property is not developed, creates a price that no buyer can buy then 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. A property or land owner can easily lose his or her property for default of payments of the property tax rates.

Property Tax payments and assessments

The value for your vacant land will be calculated by the County assessor’s office just like it would do for any other piece of property in the county. You will be needed to pay taxes based on this calculated value.

Since this is a vacant land investment, the assessed value will be lower.

Regardless of whether or not you are earning from your property, you are still needed to pay for property tax.

In each and every county all land parcels should be declared ratable, with the appropriate form of rating being applied to each parcel. The Land Taxation Policy seeks to provide a package of incentives to encourage productive and sustainable use of land and also on the other hand providing disincentives for keeping idle land.

Tax Treatment

When you decide to buy vacant land, you should be aware that you are to report your expenses to KRA.

Even if you may not be having any income on your vacant land, KRA allows you to compile all your expenses. This is inclusive of your property tax.

Are you buying property in Kenya Nairobi? Denver Group Limited is here for you. Speak to us 0701 730 267.