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Inflation’s Effect on Farm Value

Updated: Oct 5, 2018

The USDA’s Land Values 2018 Summary, August 2018 report opens by stating “The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,140 per acre for 2018, up $60 per acre (1.9 percent) from 2017 values.” Depending upon where you own your farm or ranch your value may have been more or less than the 1.9% increase.

According to the inflation rate over the last 12 months (year over year, YOY) has been 2.46%. 2.46% isn’t too bad if you compare it to the 17% inflation we experienced in the early ‘80s. But even low inflation can erode the value of the dollars you work with in your operation or in your savings/investments.

A 2.46% inflation rate erodes the value of a farm that experienced a 1.9% asset increase. In this example, your actual farm value went down since 2017 due to the effects of inflation. If you have been thinking about selling your farm or ranch land you may not have listed because of all the taxes you will pay when tax season arrives. You could be looking at 20%+ of the net sale as a tax bill when capital gains, state and other federal taxes are due.

Let inflation work for you. When you sell your farm, defer taxes, invest the proceeds and pay the taxes 30 years from now. You will actually pay the taxes with cheaper dollars. Instead of inflation eating away at the modest farm asset increase, let inflation eat away at the real cost of the tax bill in the future.

Look at what happens to $1,000 over 30 years at the different inflation rates.

The Power of Preserving Value is in your hands!

Inflation's power on the dollar.


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