The Tax Benefits of Land

Friday, September 18th, 2009

Another reason to invest in land now is to take advantage of the current 15% capital gains rate. Or consider a 1031 tax-free exchange of property.

Many investors are now using money outside an IRA if it's available, since the tax benefits such as depreciation and the ability to deduct losses are lost in an IRA environment. If you must use an IRA, a Roth IRA is preferable. The money in the Roth has already been taxed and any distributions, including capital gains on the property, are generally tax-free.

As U.S. stocks continue to fall there is an increasing number of land buyers that are using cash, savings and equity to fund their land purchases. In a recent poll conducted by LANDFLIP.com, “31 percent of respondents indicated they plan to use cash, savings or equity to fund land purchases in the near future. Only 24 percent indicated that they will rely on bank financing.”

According to Ryan Folk, founder of LANDFLIP.com, “It’s a clear indication that regardless of changes in the banking and mortgage industries, savvy buyers and investors are still aggressively looking for profitable opportunities in the market and seizing them, and land is still one of the hottest commodities in real estate.”

29 percent of the respondents reported that they will use owner financing with the remaining poll respondents reporting that 1031 Exchange funds, lease purchases and self directed IRAs are the preferred methods of financing land deals.

[Source: http://www.whybuylandnow.com/2009/08/the-tax-benefits-of-land/]

Tags: land investment, land tax benefits, tax shelter