How Being a Land Dealer vs. a Land Investor Affects Your Taxes

by Laura Mueller

When it comes to your land and taxes, there are two ways of differentiating yourself: a land dealer and a land investor. And what you choose will have some major implications for both how you file taxes on vacant land and what your short vs. long term profit potential looks like.

Here’s what to know about how being a real estate land dealer differs from being a real estate land investor—and why the better you can define your role from the outset, the better off you’ll be.

What is a Land Dealer?

A land dealer is someone whose main focus is on buying and selling land with quick turnarounds. An example of land dealing would be buying up a large tract of vacant land and then parceling it up and selling it to individual real estate developers or residential buyers.

The goal with land dealing is to pick up land for cheap and then turn around and sell it for a higher price as soon as possible. For tax purposes, land dealers are viewed as pretty standard business owners, and have the ability to deduct expenses on a Schedule C.

What is a Land Investor?

A land investor, on the other hand, is in it for the long haul. Unlike a dealer, a land investor purchases a piece of vacant property with the intent to hold onto it and allow it to appreciate in value. For example, they may purchase a couple hundred acres of land in a suburb-adjacent rural area with the hopes that eventually developers will make their way out there and want to buy.

In terms of taxes, land investors are not considered to be business owners, so they won’t file a Schedule C or be entitled to business deductions on the property. They are, however, able to make personal itemized deductions on their vacant land on a Schedule A form, including deductions related to interest and property taxes.

The Big Difference

There are a couple of big differences between a land dealer and land investor that should already be apparent—notably, land dealers are viewed as business owners and can file their taxes as such, while a land investor’s deductions are relegated to personal expenses on the property.

But perhaps the biggest difference to be aware of—or at least the one that tends to be the most confusing for individuals who are purchasing land—is when it comes to improvements. Under the Tax Cuts and Jobs Act, investors are unable to deduct expenses related to land improvements through at least 2025. Prior to the bill’s passing, Schedule A deductions related to improvements were allowed at up to 2% of the taxpayer’s adjusted gross income.

If you’re a land dealer, however, many improvements can be written off as business expenses. This difference is one of the most notable between land dealers and land investors, and one that you might not have been aware of if you previously invested prior to 2018.

New vacant land owners or those who are considering making a purchase soon should make sure that they have a clear idea of what their intent is with the property—and that they file taxes under the proper designation. Work with a tax attorney to figure out exactly where you stand, as well as what deductions you are eligible to make.

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by Laura Mueller

There’s a lot of investment potential in buying and owning land—including some income opportunities that you might not have even thought of yet.

Most people buy land with very specific use intentions in mind. But whether you’ve purchased land for recreation, farming, or just to live on, there may be a way for you turn to turn existing parts of your property into active or passive income streams. And in addition to putting more money into your pockets now, this can also increase the overall value of your land if you go to sell later on.

Here are some cash opportunities that are worth making note of if you’re planning on buying land or already own some land that you’d like to make more money off of.

1. Offer an on-site vacation rental

There’s a big market for vacation rentals, and a lot of interest in secluded and private getaways. So if you have a structure on your land that can be currently used or renovated for this purpose, consider getting into the game. Sites like Airbnb and VRBO take a lot of the guesswork out of hosting and managing your own vacation rentals, and make it so that you don’t even have to be on site in order to let guests in and collect payment.

2. Set up some camping sites

Even without a rental-worthy property on your land you can still make passive income by arranging some camp sites. Bonus if you can promote other recreational activities for those who choose to stay, such as bird watching, hiking trails, or catch-and-release fishing—all without the crowds of traditional camp sites.

3. Host barn events

Don’t put an on-site barn to waste. While there’s certainly more that goes into it than just hanging up some string lights and calling it a day, barns make an excellent and attractive venue for weddings, corporate retreats, and other events, and many people are willing to pay a pretty penny for such a stunning space. This income stream isn’t quite so passive since you’ll need to coordinate with caterers, planners, and the like, but it is a great opportunity if you’re looking to expand your land’s use.

4. Lease agricultural plots

Do you have arable land that you’re not putting to any profitable use? Look into leasing out select portions to hobby farmers, community gardeners, or others who want to grow their own crops but don’t have the land to do it. You’ll get a rent payment every month, and as a bonus, you’ll have someone else working to beautify and maintain portions of your land.

5. Offer indoor and/or outdoor storage

If you’ve got the space and aren’t using it, why not rent it out to people who have stuff and nowhere to put it? Consider setting up indoor or outdoor storage spaces that you can rent at competitive rates. There’s a huge need for this, especially for large items like boats and RVs and for storage in rural areas where other facilities might not be so conveniently located.

Before pursuing any additional revenue stream, be sure to check the zoning and use requirements that pertain to your land. This way, you can be sure you’re in the clear and that you can make extra cash without running into any issues.

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by Laura Mueller

Long before there were massive commercial and residential developments there were forests, which means that purchasing forest land is one of the oldest land investments around. And centuries later, it’s still one of the best investments that you can make.

There are a number of unique benefits to buying forest land, regardless of whether you’re looking to turn a profit on the timber or not. With that in mind, here are five reasons why forest land is a good investment — and why you might want to consider adding it to your land buying portfolio.

1. It’s sustainable

As we all know, saleable assets don’t grow on trees. But trees themselves? That’s a whole other story. With proper replanting and sustainability-driven techniques, you can ensure that your investment is a long-term one, continuously repopulating your timber supply while also making a return on it. So if you’re looking for a land investment you can one day pass on to the grandkids, forest land is hard to beat.

2. Timber is impervious to other market forces

Ebbs and flows are normal in the economy, but that doesn’t mean they’re welcome, especially if you’re invested in an asset that faces lower demand as a result. Fortunately, timber is relatively impervious to market conditions, with continuous need despite what the economy is doing. That’s not a promise that you won’t experience times when demand is higher than others, but you can be pretty confident that you won’t face a time when demand is gone all together.

3. It’s a hard asset

Like other types of land, forest land is hard asset — meaning it’s inherently valuable and that value tends to stay steady over time. And unlike other types of assets, it’s unlikely to face huge swings related to inflation. That sort of predictability is a good thing in all investments, and one of the reasons that forest land — and all other types of land — remains a top opportunity for both private and commercial investors.

4. It has value beyond money

There is so much to appreciate about forest land beyond its income potential. Whether you intend to build on it or use it for recreational purposes, owning a piece of forest is like owning your own private natural oasis, complete with abounding flora and fauna, and no shortage of inherent beauty. This is a big driver for forest land investments, with many people who make the purchase utilizing their property as much for the environment it offers as for its profit value.

5. There’s no pressure to act right away

Forest land is a hands-off investment that sustains itself without the need for human input or action (and in fact, the less human interaction, the better). If you’re playing the long game with your land portfolio, or if you’re just not ready to capitalize quite yet, that’s a big benefit.

You can find forest land for sale in every state. So if you think it’s right for you, browse our listings in your area and work with a local real estate agent to discover more about your options.

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by Mark Bingaman

My youngest daughter graduated from high school recently. When the last of your three munchkins flips the tassel and flings the mortarboard, a dad (maybe even the one writing this now) can become somewhat nostalgic and reflective.

So as our celebratory graduation weekend at the family cottage wound down, I found myself repeating one thought both verbally and mentally: “I sure am glad I bought this property when the kids were little.”

It was the very early 1990’s and our first baby was just a few months old when the idea of buying land for a family cottage initially came to mind. It would make sense to think that because I grew up without a father the concept of being a “family man” and doing family “things” – like searching for good recreational land to buy – might have been a bit foreign to me, but it seems as though the opposite was true.

The fact that I missed out on a ton of special experiences as a child made me even more determined to be the best father I could be. And it seemed that having a special place to always retreat to – a family retreat or recreational area – would be a heck of a good idea. I don’t know exactly where the idea came from, perhaps it just seemed romantic to me at the time, but I do recall realizing that on top of establishing and procuring us a family play spot, the concept of investing in land and buying property for financial appreciation also made plenty of sense.

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I’ll admit that the decision and the financial obligation was somewhat difficult at the time. My wife and I were in our middle and late twenties respectively when we first began searching for land to buy. Neither of us made much money, and we had a mortgage and a new baby to worry about, so when we found the perfect investment land for sale, it was something of  a stretch to commit to the purchase and sign on the dotted line.

But sign we did, making the choice to invest in recreational property and sacrifice financially in other areas. We drastically cut back on (or completely eliminated) our vacation and entertainment budgets. Rather than family vacations at Disney or weekend getaways to Chicago we spent that same time at our family cottage. We also cut back on things like having two expensive car payments and discovered that we could get by quite nicely with a just a decent family vehicle for my wife and the kids, and a budget used car for me for work.

The truth of the matter is that it wasn’t all that difficult to cut back on expenses and pay for a family retreat instead. Even better, as a few years went by and I became even more financially literate and responsible, the concept of this beautiful land serving as both a spot for family getaways and as a big savings account for our retirement made even more sense and excited me more.

Here was a place where we built memories and bonded with our friends and loved ones. It was also a spot where we were strengthening our financial future and that of our children (and maybe even their children!)

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Regardless of how it works out, I know a couple of important things: I’m sitting here in our cottage, typing this article a few days after the high school graduation of my final child. And the entire family gathered here, atop this recreational land, at our family retreat. Soon, we will do it again; gather here to have some fun on Father’s Day weekend while also celebrating the 18th birthday of our youngest.

Yes, yes, yes I am: “I sure am glad I bought this property when the kids were little.”

As you scan through the listings and available property for sale here on LandHub.com, you’ll undoubtedly discover any number of places perfect for building your own family traditions. I hope you do!

Photos Courtesy of The Deer House in Mercer, WI

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