10 Tax Tips for Farmers


1
Section 179
Farmers can deduct machinery and equipment from their taxes. Imacon/Getty Images

People are nuts about Section 179. And on the surface, you can absolutely see why: It's a way of deducting the cost of certain business expenses and equipment at full value. A lot of business expenses have to be depreciated, meaning that you can knock a fraction off on your taxes every year until the expense is fully deducted. That's great if you're looking to help relieve a tax burden for several years running, but if you're looking for a way to quickly lower your tax bill this year, a full deduction is really appealing.

Obviously, there are some rules for farmers looking to take Section 179 deductions. All the property has to be tangible or real property, and -- surprise surprise -- some of those rules are too complicated to cover here. But know you can deduct any machinery and equipment, some storage tanks and even fur-bearing livestock. (Yes, it's detailed.) You can deduct up to $25,000 using Section 179, as of 2014.

So, are you ready to harvest some more money come tax time? Read on for more tax-related information.

Author's Note: 10 Tax Tips for Farmers

While the current limit for the Section 179 deduction is $25,000, it was at a whopping $500,000 in 2013. Congress let the raised cap expire, but do be diligent about checking with the IRS to make sure there haven't been changes in the law: They can certainly apply a higher limit retroactively and create a much higher deduction again for the 2014 tax year.

Related Articles:

Sources:

  • Idlebrook, Craig. "Tax Tips for Farmers: Ten Ways to Make April 15th Less Stressful." Maine Organic Farmers and Gardeners Association. 2014. (Oct. 4, 2014) http://www.mofga.org/default.aspx?tabid=707
  • IRS. "Crop Insurance and Crop Disaster Payments -- Agriculture Tax Tips." Sept. 4, 2014. (Oct. 4, 2014) http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Crop-Insurance-and-Crop-Disaster-Payments-Agriculture-Tax-Tips
  • IRS. "Farm Business Expenses." 2013. (Nov. 2, 2014) http://www.irs.gov/publications/p225/ch04.html#en_US_2013_publink1000217880
  • IRS. "Publication 225." 2013. (Oct. 4, 2014) http://www.irs.gov/publications/p225/ch07.html#en_US_2013_publink1000218173
  • IRS. "Ten Things to Know About Farm Income and Deductions." March 26, 2013. (Oct. 4, 2014) http://www.irs.gov/uac/Newsroom/10-Things-to-Know-about-Farm-Income-and-Deductions
  • Kauppila, Dennis et al. "Is My Farm a Hobby or a Business?" University of Vermont Extension. Nov. 2007. (Oct. 4, 2014) http://www.uvm.edu/extension/community/hobbybusinessfactsheet.pdf
  • Keen, Scott. "10 Tax Tips for Farmers." AdviceIQ. June 23, 2014. (Oct. 4, 2014) http://adviceiq.com/articles/scott-keen-10-tax-tips-farmers
  • Lee, Bonnie. "Tax Tips for Farmers." Fox Business. April 6, 2014. (Oct. 4, 2014) http://smallbusiness.foxbusiness.com/finance-accounting/2012/04/06/tax-tips-for-farmers/
  • Schell, Rich. "It's Tax Time! How to Navigate the Tricky World of Farm Taxes." HobbyFarms. March/April 2004. (Oct. 4, 2014) http://www.hobbyfarms.com/farm-marketing-and-management/farm-income-taxes-14991.aspx
  • Smith, Kunz & Associates. "Income Averaging for Farmers." 2014. (Oct. 4, 2014) http://www.smith-kunz.com/news.php?id=6
  • Weissman, Jordan. "America's Dumbest Tax Loophole." The Atlantic. April 17, 2012. (Oct. 4, 2014) http://www.theatlantic.com/business/archive/2012/04/americas-dumbest-tax-loophole-the-florida-rent-a-cow-scam/255874/

UP NEXT

What You Can Do Now to Get the Most from the New Tax Law

What You Can Do Now to Get the Most from the New Tax Law

The most sweeping tax overhaul in decades became law in December 2017. HowStuffWorks explains what taxpayers can do to benefit from the tax changes.


More to Explore