Rental Property

• If you own a rental property, the IRS allows you to deduct maintenance expenses as a deduction on Schedule C of your federal tax return. The IRS does not allow you to deduct improvements that increase the value of your property. As a result, you receive tax benefits when you do not improve your rental investment. General maintenance expenses that keep the property in its original state are entirely tax-deductible as business-related work expenses.
  
  

Depreciation

• As the owner of a rental investment, the IRS allows you to deduct depreciation on your federal tax return. Since wear and tear on a rental property reduces its value, depreciation allows you to recover the cost of your property over time. For a residential rental property placed in service after 1986, the IRS requires you to use the Modified Accelerated Cost Recovery System to depreciate your property. Worksheets on how to calculate depreciation according to this method are found on the IRS website. If you make home improvements on the property, you cannot include them in your depreciation calculation.
  
  

Buyer Benefits

• If you are a buyer looking to purchase a property, there are tax benefits to purchasing an unimproved property. According to the IRS's Energy Star program, in 2011, you can take 10 percent of the cost of energy-efficient home improvements up to $500 as a tax credit on your federal return. Some of these improvements include purchasing a biomass stove, upgrading your air conditioning unit, replacing your roof with an energy-efficient metal or asphalt roof and upgrading your hot water tank.
  
  

Real Estate Taxes

• Local tax assessors evaluate a property every few years to establish its real-estate tax value. Assessors generally compare properties within the same neighborhood and evaluate the real estate tax based on square footage and land value. However, assessors also consider the overall condition of a property when they appraise its worth. An unimproved property will often appraise for less than another same-sized property within the same neighborhood. Since real estate taxes are calculated on the basis of property appraisals, there is a tax benefit to owning an unimproved property.