IA1stGenFarmer - 4/25/2021 11:58

Wondering if some of you could clarify how land payments work when you are purchasing ground? My understanding is that you can not depreciate/deduct the cost of the land and the payment needs to be made with "post tax dollars." Is this correct?

If that's the case, am I thinking this through correctly that if say your payment is $500/A for your yearly payment ($300 Principle/$200 Interest), that $300 would be taxable income? Now say you are trying to 100% cashflow the ground by itself with out supplementing it and you are in a 25% tax Bracket.
Technically would the acre need to generate $575/A ($200int + $300Prin + $75 (300 x 25%Tax)) (assuming you had NO other deductions) to make the land payment and pay the income tax on the $300 principle?

Can any of you shed some light on this for me, this is how I have it made up in my head but I have never experienced this. Generally speaking I have only ever spent money on items that are deductible and effectively lowering my taxable income. Would a land purchase on paper increase my taxable income then? (again, assuming I have no other deductions)

Are there any other items that are deductible/depreciable when it comes to land ownership, the ones I'm familiar with and please correct me if I'm wrong are:

Interest
Taxes
Fence lines
Tile
Excess Fertilizer/Nutrients?
Others?

TIA!!!!!!!!!