Nine Tax Tips for Farmers

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Nine Tax Tips for Farmers

• 9 Tips to Help at Tax Time

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Crop Insurance Payments

• Insurance payments from Crop
• Insurance and Crop Disaster
• Support are considered income.
• Generally, you should report these
• payments as income in the year
• you received them.

3
 Weather-Related Sales

• Bad weather, such as drought or
• flood, may force you to sell more
• livestock than you normally would
• in a year.
• If this is the case, you may be able to
• postpone reporting a gain from the sale
• of the extra animals.

4
Sale of Items purchased for Resale

• You must report the sale of
• livestock or other items you bought
• for the specific purpose of resale.
• You may be able to deduct their
• cost basis in the year of their sale.
• You may also deduct other
• related costs such as sales tax and freight.

5
Employee Salary

• You can deduct wages paid to your
• farms full and part-time
• employees.
• You are required to withhold Social
• Security, Medicare and income
• taxes from their wages.

6
Farm Expenditure

• Farmers may deduct ordinary and
• necessary expenditures as business
• expenses.
• Ordinary and necessary expenses
• are expenses that are considered a
• common and accepted cost for the
• business of farming.

7
Loan Repayment

• You can only deduct the interest
• paid on a loan if the proceeds
• from the loan are used for your
• farm.
• You cannot deduct interest paid
• on a loan that you used for
• personal expenses.

8
Farm Income Averaging

•  For tax purposes, you may be able
• to average some or all of the
• farms current year's income by
• spreading it out over the last three
• years.
• This may reduce your taxes if your
• farm income is higher this year
• than past three years.

9
Fuel Tax Refund

• You may be able to claim a tax
• refund or a tax credit for the
• federal excise taxes paid on the
• fuel you used on your farm or
• for farm work.

10
Operating Loss

•  If your expenses are more than
• income for the year, you may
• have a net operating loss.
•  You can carry that loss over to
• other years and deduct it.
• In this way, you may receive a
• refund of all or part of the income
• tax you paid in previous years or even
  reduce your tax
• liability in future years.

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