Tax season is almost here, and could be a good time to get prepared for filing your taxes. If you make your living in the agricultural industry, there are a few year-end tax tips that might help make the process go more smoothly. Whether you plan to file your taxes yourself or require a professional's assistance, below are some year-end tips that you should consider.
As with many farmers, you may have more than one stream of income. Income types can vary with farming activity, so you need to know what revenue streams will be counted as part of your income. One of the most common forms of income from a farm is sales. This can include sales of livestock, grains, produce, and anything being resold; cooperative distributions, agricultural program payments, federal disaster payments, and any crop insurance proceeds will need to be included as well. Even if you are paid for side work, you will need to claim that. Other less common sources of income for farmers can include bartering and prize money from livestock competitions.
Knowing what taxes you are allowed and not allowed to deduct can help you lower your tax liability. While many expenses on a farm may be deducted, the primary items that are not allowed are personal living expenses, expenses that you used to raise food for family consumption, the cost of deceased animals, inventory losses, and personal losses. Deductions allowed will typically be linked directly to farm activity and the sale of items. You are allowed to deduct chemicals, feed, seeds, and veterinary costs. Other deductions are similar to most businesses, such as depreciation, mortgage interest, and insurance.
Be aware of any and all tax breaks that you qualify for to help ease your tax burden. Some of the tax breaks that can be applicable to farmers include a home office deduction, which will allow you to deduct expenses related to space in your home you use for work. Fuel credits can also allow you a credit or refund for some excise taxes on fuel used for the purposes of farming. If your year was not profitable, you would be able to take a deduction if your losses exceed your income.
The year-end tax tips above are not the only considerations you should make before filing your return. Contact the experienced professionals at LPL Financial to help better prepare you for the upcoming tax season.
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