Did you know you can invest in farmland in an IRA? It’s possible to hold farmland as part of a long-term retirement strategy—while staying fully compliant with IRS rules.
The IRS does not limit what assets you can hold in an IRA; instead, it restricts how certain assets are used. Under the Internal Revenue Code, IRAs are prohibited from investing in:
- Life insurance contracts
- Collectibles, such as artwork, rugs, antiques, gems, stamps, coins (with limited exceptions), or alcoholic beverages
- Prohibited transactions under IRC §4975, which are transactions that directly or indirectly benefit you, your spouse, or other disqualified persons (including lineal ascendants and descendants)
Because of these rules, you cannot personally farmland owned by your IRA or lease it to yourself or other disqualified persons. However, your IRA can purchase farmland and lease it to an unrelated third party at fair market value or hold the land purely as an investment.
When structured properly, all rental income and any appreciation from the farmland flow back into the IRA on a tax-deferred (Traditional IRA) or tax-free (Roth IRA) basis. This makes farmland an attractive option for investors seeking diversification through tangible, income-producing assets they understand and trust.
How to Invest in Farmland in an IRA
To invest in farmland, you must use a Self-Directed retirement account, which allows alternative assets beyond stocks, bonds, and mutual funds.
There are generally two ways to structure a farmland investment within an IRA:
Traditional Self-Directed IRA
The IRA directly purchases and owns the farmland. All income and expenses must flow through the IRA, and the investment must be managed through the IRA custodian.
Self-Directed IRA with Checkbook Control (also known as a Self-Directed IRA LLC)
In this structure, the IRA owns a single-member LLC, and the LLC purchases the farmland. As manager of the LLC, you gain greater control and flexibility while maintaining IRS compliance. This structure can also provide limited liability protection and streamline investment-related transactions.
If you are self-employed or own a business with no full-time employees other than yourself and your spouse, you may also be able to invest in farmland using a Self-Directed Solo 401(k). Certain investors may also qualify to use a Self-Directed SEP IRA, depending on their business structure.
Book a free call with a self-directed retirement specialist
- Review your self-directed retirement options
- Learn about investing in alternative assets
- Get all of your questions answered
Important Compliance Considerations
When investing in farmland through an IRA:
- All expenses (taxes, maintenance, insurance) must be paid directly by the IRA or IRA-owned LLC
- All income must return to the IRA
- You and other disqualified persons may not use, live on, or personally benefit from the property
- Leases must be at fair market value and with non-disqualified third parties
Following these rules is essential to preserving the tax-advantaged status of your retirement account.
Get Started with IRA Financial
With a Self-Directed IRA, you can invest in farmland—and other alternative assets—for one flat fee. IRA Financial specializes in helping investors take control of their retirement savings while remaining fully compliant with IRS regulations.
If you want to learn more about investing in farmland with your retirement account, give us a call, schedule a consultation, or complete one of our contact forms. One of our IRA experts will guide you through the process and help you invest freely and retire confidently.
About the Author
Adam Bergman is a tax attorney and the founder of IRA Financial, one of the largest Self-Directed IRA platforms in the United States. He has helped more than 27,000 clients take control of their retirement savings, overseeing over $5 billion in retirement assets. Adam is also the author of nine books focused on helping investors understand and confidently manage their retirement strategies.
