Tax Efficient Buying

[Overby]

I've been asked a question that I can't quite answer properly.

Is it better to rent or buy a farm in terms of tax efficiency? I've always thought buy (if possible) for obvious reasons, but is it sensible tax wise? ie Rental payments can be written off as an expense but mortgage/loan payments aren't....does that potentially lead to a double whammy of paying out and also then having tax to pay making everything unviable? I got myself in a right pickle trying to explain and am now totally confused.

Anyone got a simple explanation?

 

[chickens and wheat]

Your tax deductible interest on farm loan will similar cost to the rent.

 

[teslacoils]

Depends if you think capital repayments on land are better than investing the same money elsewhere.

Depemds if you like the flexibility to walk away, or like the idea of staying put for 20+ years.

 

[Overby]

Your tax deductible interest on farm loan will similar cost to the rent.

Really?

 

[B R C]

Yes there won’t be much in it in terms of rent vs interest, both tax allowable. Where the taxed capital comes from for the capital repayments is a different question.

 

[chickens and wheat]

Really?

I would say very similar, We own less land than we used to rent, while selling some land as a deposit on purchase of current land . so not an easy comparison.

 

[robs1]

When you stop renting land you have nothing when you finish paying interest you have some land

 

[livestock 1]

If you pay tax then you’ve generally got something to show for it!
If you don’t pay much tax you generally don’t have much to show for it.
Your answer is in your question

 

[DRC]

Depends if you see owning land as the be all and end all. Might be better renting a good sized farm with good land than owning a smaller, poor farm.
profits from the better farm can buy other investments , houses or even more land .

 

[farmerdan7618]

Buy in a pension fund, then rent it off that. Very tax efficient, but wouldn't suit everyone.

Otherwise, little difference in it really, depends more on the earnings potential of the farm.

 

[jackrussell101]

Buy in a pension fund, then rent it off that. Very tax efficient, but wouldn't suit everyone.

Otherwise, little difference in it really, depends more on the earnings potential of the farm.

Would you lose APR doing that?

 

[farmerdan7618]

Would you lose APR doing that?

Sits outside of your estate on death if done right, so no need for APR.