Agricultural Economics Department
Alternatives to High Nebraska Agricultural Land Real Estate Taxes, Part 1 of 2: Capital Gains and Alternative Investments
Date of this Version
Farm and ranch Management News (May 8, 2020).
Also available at https://farm.unl.edu/alternatives-high-nebraska-agricultural-land-real-estate-taxes-part-1-2.
In Nebraska, most of my conversations about managing agricultural properties, whether rental or production, tend to steer toward real estate taxes at some point. While many counties in Nebraska have seen agricultural land taxes drop slightly since the 2015-2017 period, they are still a significant portion of operational expense. For example, dryland acres in Southeast Nebraska ballpark around $60 an acre. For someone looking to cash rent inherited ground, this becomes a major point of concern when looking for a tenant. If that ground cash rents for $190 an acre, and $60 an acre goes towards real estate taxes, that leaves us with $130 an acre. Looking at an 80-acre farm, that’s $4,800 in real estate taxes, leaving you with $10,400. Then you still have to account for state and federal income taxes and managing/operational expenses. Suppose you ended with a net income of $8,000. If ground is selling for $6,500, that puts a total worth of the farm at $520,000, giving us a return on asset of 2% for the rental activity. The question I propose to some is if agricultural land is the best investment for their portfolio?
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Copyright 2020, the author. Used by permission.