Tax Benefit Opportunities of Investing in Farmland

Structural Advantages of Farmland as a Tax-Efficient Asset Class

In the search for resilient, tax-efficient investments, farmland stands out as a real asset with both income and appreciation potential. Alongside its inflation-resistant characteristics and low market correlation, farmland's inherent tax profile reinforces its role as a strategic real asset.

When accessed through vehicles like LandFund Partners’ Soil Enrichment Fund (SEF), farmland becomes a highly efficient tool for enhancing after-tax returns.

Depreciation: A Built-In Shield for Passive Income

One of the core structural tax benefits of investment-grade farmland lies in depreciation. When farmland is owned through a limited partnership like SEF, investors can benefit from depreciation on various improvements associated with agricultural operations.

Depreciable assets include a wide array of farm infrastructure:

·      Irrigation systems

·      Center pivots

·      Wells and water infrastructure

·      Grain bins and storage facilities

·      Shops and equipment sheds

In addition, Section 180 soil nutrient depreciation allows for the capitalization and depreciation of certain soil amendments and improvements, an added benefit that further reinforces farmland’s efficiency in protecting passive income from taxation.

Tax-Deferred Growth Through Capital Appreciation

While annual income is a key component of farmland returns, capital appreciation plays an equally significant role, especially with high-quality row-crop properties in water-secure regions like the Mid-South.

Crucially, gains on farmland are not typically taxed until an exit event, such as a fund redemption or property sale. This allows compounded value to grow without interim taxation, enhancing overall wealth accumulation and aligning well with long-term investment horizons.

Additional Consideration: Inflationary Environment Performance

As a real asset tied to food production and land value, farmland has historically performed well during inflationary periods. Commodity-linked income and land appreciation often rise alongside inflation, offering a natural hedge that complements its tax-efficient advantages.

Considerations for Tax-Aware Allocators

In an era where traditional income streams are increasingly taxed and real after-inflation returns are harder to find, farmland offers a distinct set of benefits:

·      Income shielded by depreciation

·      Deferred taxation on appreciation

·      Structural alignment with tax-advantaged entities

·      Resilience in inflationary cycles

·      Underlying asset stability and low market correlation

These characteristics combine to position farmland as a compelling choice for investors seeking diversification with embedded tax efficiency.

Disclaimer: Not Tax Advice

This information is provided solely for informational purposes and is not intended, nor should it be construed, as tax advice, legal advice, investment advice, or a recommendation to purchase or sell any security or adopt any investment strategy.

The tax treatment of any investment strategy or financial product can be complex and depends on an individual's specific circumstances.

Any prospective investor should consult with their own independent accountants, tax advisors, legal counsel, and financial professionals regarding the potential tax consequences, benefits, and suitability of this, or any other, investment strategy or transaction.

About LandFund Partners

LandFund Partners acquires and manages premium farmland across the Mid-South United States. We give institutional and accredited investors direct access to the asset class through carefully managed funds. Since our firm was founded in 2013, LandFund Partners has successfully deployed capital across seven funds and over 50 farmland investments in the Mid-South region. Our disciplined approach has delivered consistent returns, capital preservation, and enhanced asset value through proactive management. We lease the land to farmers in return for cash rent payments, providing stable income while maintaining long-term ownership. Investors in LFP Soil Enrichment Fund (“SEF”) receive an annual distribution, while participating in the long-term upside of farmland asset values.

To learn more about investing in farmland as an alternative asset:

• Get in touch with our team: Investment Interest Form Fill
• Newsletter Signup: LFP Newsletter
• Learn more about Mid-South Farmland: LFP Mid-South Farmland Whitepaper
• Email: [email protected]