Tags: farmers | tax | tips | business

Farmers: Tax Tips That Work for Your Farm Business

By    |   Monday, 09 May 2016 09:49 AM

If you make a living from your farm, large or small, you are in the farm business, and there are some interesting tax tips that can work for you.

The Maine Organic Farmers and Gardeners Association advises farmers to download and get familiar with Publication 225, available from the Internal Revenue Service (IRS) on its website. This Farmer’s Tax Guide includes useful information written in simple terms, practice worksheets, and depreciation tables. MOFGA also recommends consulting with a trusted accountant before making major financial decisions, particularly equipment purchases, so you understand the tax implications.

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Farming can have its ups and downs with regards to productivity and harvests depending on weather and other circumstances beyond your control. According to the IRS, farm income averaging may help ease the current year’s tax burden if the farm is unusually productive. For example, you may be able to spread some of the current year’s income over the past three years. This can be especially helpful if one of the past three years was a low-income year on the farm. In addition, if bad weather forces you to sell more livestock than you normally would, the IRS allows you to postpone reporting the profit from the sale of those additional animals.

In order to take advantage of most of the government’s tax breaks for small farmers, avoid classifying your farm as a hobby farm rather than a full-time business. According to Zacks, hobby farms have long been used as tax shelters by wealthy people who do not wish to pay taxes on large land properties, horse pastures, and ranches used primarily for recreation. Hobby farms are not eligible for the many tax breaks afforded to small farm businesses.

Finally, on many small farms, the whole family is involved in the daily labor. From a tax perspective, it may make sense to actually add your minor children as employees of your business. Their wages would be tax deductible. Just be sure not to pay them so much that they would have to pay taxes on their earnings, says Maine Organic Farmers and Gardeners Association.

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If you make a living from your farm, large or small, you are in the farm business, and there are some interesting tax tips that can work for you.
farmers, tax, tips, business
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2016-49-09
Monday, 09 May 2016 09:49 AM
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