Understanding Taxes When Selling Farmland
Top 50 Questions about Farmland
When selling farmland, you’ll encounter three primary types of taxes. Understanding these taxes will help you plan for your financial obligations and maximize your sale’s benefits.
1. Property Taxes
- Timing: In Iowa, property taxes are paid a year in arrears, meaning you pay this year for last year’s taxes.
- What You Owe:
2. Transfer Tax (Revenue Stamps)
- This is a state tax applied when transferring property ownership.
- Rate: $1.60 per $1,000 of the sale price.
- Example: For a $1,000,000 farm, transfer tax is $1,600.
3. Capital Gains Tax
- What You Pay: Tax is owed on the difference between your basis (what you paid for or inherited the property at) and the relinquished price (sale price).
- Components:
- Consult a CPA to evaluate options for reducing your tax liability, such as through a 1031 exchange.
Key Takeaways
- Property Taxes: Prorated to the closing date; paid only for the days you owned the farm.
- Transfer Tax: $1.60 per $1,000 of the sale price; typically under $1,000 for most transactions.
- Capital Gains Tax: Paid on the profit from the sale, based on federal, state, and net investment tax rates.
For personalized guidance on taxes and selling your farmland, contact David Whitaker – Iowa Land Guy today!
David Whitaker | Iowa Land Guy