Many tax benefits for people in the business of agriculture. Farms include plantations, ranches, farms and orchards. Farmers can raise cattle, poultry or fish, or growing of fruits or vegetables.
Here are 10 facts about farm income and expenses to help tax season.
- From crop insurance. Insurance payments for damages to crops count as income.In general, you must report these payments in the year you receive them.
- Deductible farm expenses. Farmers may deduct ordinary and necessary expenses who paid their businesses. An ordinary expense is a common and accepted for that type of business spending. A necessary expense means a cost that is appropriate for that business.
- Employees and staff hired. You can deduct reasonable wages paid to workers in full-time and part-time from their farm. Must withhold Social Security, Medicare and federal tax wages.
- Selling items for resale. If you sold livestock or items purchased for resale, you must report the sale. Your gain or loss is the difference between the selling price and the cost of the item.The base is typically the cost of the item. The cost may also include other amounts paid as sales tax and freight.
- The repayment of loans. As can deduct interest paid on a loan if the loan is used for agricultural business. You can not deduct the interest you paid on a loan used for personal expenses.
- Weather-related sales. Severe weather such as drought or flood can increase the sale of a larger quantity of animals more livestock than normal in a year. If so, could delay the declaration of profits from extra sales.
- Net operating losses. If your expenses are greater than your income for that year, you may have a net operating loss. The loss can be deducted in other years. You could get a refund of part or all of the taxes paid in previous years. It may also reduce your taxes in subsequent years.
- Average farm income. You could average all or some of the agricultural income of the current year with distribution over the last three years. This can reduce your taxes if your farm income is high in the current year and low in one or more in the last three years.
- Fuel and road use. You may claim a tax credit or refund of taxes paid by the consumer for fuel used in their farm operations.
- Farmer’s Tax Guide. For more details on this topic see Publication 225 , Farmer’s Tax Guide.You can get it on IRS.gov or call the IRS at 800-TAX-FORM (800-829-3676) to have it mailed.