Recreational land purchase, how to help with taxes

[menhaden_man]

We're looking to buy a chunk of land (with or without a building/cabin). Ideally 40-60 acres.

I was curious if anyone had advice on how to put this sort of thing to work on your tax burden.

 

[timberland]

real estate? managed forest law, forest crop, crp, lots of programs

Income, my tax guy says land is an investment/asset. it doesn't depreciate until you log it. if it is not your primary residence you pay capital gains taxes on any profit, minus investments, so if you improve it, make sure you keep track of costs/receipts.

 

[Haggin]

Depends on type of property and location.

Fortunately, we can lease ours for grazing cattle. Offset the real estate taxes (horrible here in NE), allows me to run a steer or two before finishing him in the lot at home if I need/want to (think Schedule F income and expenses), and allows for some management practices to be counted as expenses or depreciable items (fencing, gates, fertilizer, spraying, tree removal, "land management", etc.) to offset rental income. This is primarily a whitetail property, and the lease has very specific stocking and grazing dates outlined. Note, this is not a money making ownership venture, we afford the property from our normal job income.

I've thought about leasing out upland and fowl hunting rights too, but I don't need another person with access.

 

[Molon Labe]

I dont think OP was talking about the tax burden of the land itself.
If property taxes are an issue on 40 acres the property shoudnt be bought.

I'm guessing you were wondering how you could reduce your income tax burden with land purchase?

If so...many options for you.
You could start a "farm" where expenses can be deducted such as fuel, depreciation etc.
Types of farms...well...you could raise a couple cattle or start a tree farm or a nursery.
Farming requires equipment...tractor, UTV, chainsaws, fuel, inputs for crops...all those items if used for managing your farm property can be thrown on a schedule F and your losses while you start your farm can then help to reduce your burden on your 1040. I think you need to be in the black every few years or so...but im not totally sure on that part. Accountant will be very helpful.

First off talk to your CPA since they will know your situation better than randoms on the internet.

 

[jmez]

The AG or farm avenue depends on local and state laws. In SD it depends on size of property first and that varies by county. It then depends on animal type.

Good friend of mine raises horses for a living. He has over 100 of them and a large ranch. In order for him to claim an Ag exemption he has to have a certain number of cattle on the place. Horses don't qualify it.

Part of his operation is training do he keeps roping steers. That allows him to claim an Ag exemption.

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[menhaden_man]

I dont think OP was talking about the tax burden of the land itself.
If property taxes are an issue on 40 acres the property shoudnt be bought.

I'm guessing you were wondering how you could reduce your income tax burden with land purchase?

If so...many options for you.
You could start a "farm" where expenses can be deducted such as fuel, depreciation etc.
Types of farms...well...you could raise a couple cattle or start a tree farm or a nursery.
Farming requires equipment...tractor, UTV, chainsaws, fuel, inputs for crops...all those items if used for managing your farm property can be thrown on a schedule F and your losses while you start your farm can then help to reduce your burden on your 1040. I think you need to be in the black every few years or so...but im not totally sure on that part. Accountant will be very helpful.

First off talk to your CPA since they will know your situation better than randoms on the internet.

Yeah, I was curious how to get a write off... some good advice here.