During the past two years as crop prices have increased, so has the value of farmland. Midwest farmers in a five state region saw a 19% increase in value as of April 1 from a year earlier. The Great Plains states posted a 25% increase led by a 39% jump in Nebraska and 24% in Kansas.
The purchase of farm land by an investor using retirement funds provides multiple opportunities for passive income. Leasing farm land for crop production, grazing, water, and mineral rights provides substantial opportunity for passive income and long-term capital gains.
Income or gains generated by an IRA generate tax-deferred/tax-free profits. Using a Self Directed IRA to purchase farmland allows the IRA to earn tax-free income/gains and pay taxes at a future date (in the case of a Roth IRA the income/gains are always tax-free), rather than in the year the investment produces income.
With a self directed IRA real estate, you can invest tax-free in farm land and not have to pay taxes right away – or in the case of a Roth IRA – ever! All the income or gains from your real estate farm deals flow though to your IRA tax-free!