Re: OT: taxes on small farm

Posted by paul on October 07, 2005 at 12:36:47 from (66.60.197.232):

In Reply to: OT: taxes on small farm posted by Marcuss on October 07, 2005 at 09:50:43:

In general, farm expenses work like this:

Short term expenses are fully deductable 'this' year. Seed, fuel, rent, etc.

Mid term expenses, such as equipment, tractors, large tools, portable buildings, etc. are expensed over 3-7 years life expectancy. That means you deduct perhaps 1/7 of the cost every year for the next 7 years.

Long term assets, such as land, buildings, tile, etc. are considered long term expenses and are deducted over a 20 year (more or less) time period. Your machine shed would fall into this catagory, & will offer you tax savings over a 20 year period. You cannot deduct these capitol assets all in one year - no way.

Now, as your short term, mid term, and long term deductions can quickly become more expenses than the small farm can generate, be very careful that you do not trigger yourself into a hobby status, and no deductions at all will be allowed. Generally you need to turn a real profit 2 of 5 years to keep your farm status. However there is grey area, & if the IRS flags you, it is up to you to prove you are a 'real farm for real profit'.

If your shed saves you $1000 a year on taxes, your farm income drops to $500 a year. Any other perchases, or a couple bad years - and you fall into the hobby class. Be careful of this.

I'm just a simple dirt farmer, so obviously as you say, talk with your tax person. A good, farm-experienced CPA - not H&R or such. There are many creative ways to change the above, and to take bigger or smaller tax deductions, or to change your farm income by selling 2 year's of crops in one year, none in the next, etc. to keep IRS flags away from you - somewhat. But, the above is the basic framework that you have to work with.

I've made very little money farming, gaining assets rather than income, but as it is my sole job, the IRS looks at me differently. With you having so little farming, plus a 'real' job, they will look at you in a different light.

--->Paul

Follow Ups:

• Re: OT: taxes on small farm supergrumpy 13:22:23 10/07/05 (3)
  • Re: OT: taxes on small farm Marcuss 14:21:51 10/07/05 (2)
    • Re: OT: taxes on small farm James2 22:30:02 10/07/05 (1)
      • Re: OT: taxes on small farm supergrumpy 08:46:59 10/08/05 (0)
• Re: OT: taxes on small farm dhermesc 12:44:40 10/07/05 (0)

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