Over 17 Agriculture Tax Deductions That Can Help Your Farm Keep More Cash

The amount of money you pay the IRS is based on how much profit you’ve made that year. Before we begin any discussion on agriculture tax deductions, it’s important that we remind you: it is illegal to deduct any expenses that are not legitimate.

Having said that, we’ve spent the past 40+ years helping clients who run ag operations keep as much of their hard-earned money as possible through the use of valid tax deductions. We believe that you shouldn’t make the mistake of overstating your profits, and you shouldn’t send the IRS any more money than what you rightfully owe.

(That’s one reason we put together another blog post recently: “How to Save On Your Farm Taxes By Knowing What Vehicles are Eligible for Section 179”. If you’ve got cars, trucks, and tractors moving around on your farm, it’s definitely worth a read!)

To help you further know what kinds of deductions your agriculture business can take advantage of, we thought we’d briefly run through a list that the IRS put together. These items are covered in detail in IRS Publication 225, The Farmer’s Tax Guide.

It’s an extremely long document that could seem a little overwhelming! But since taxes are what we do all day, every day, we’ve read it carefully and are ready to help you save as much money as possible. Once you’ve looked over this list, you might be surprised at how many tax deductions you have lying around already!

Common Agriculture Tax Deductions

  1. Prepaid Farm Supplies – Any feed, seed, fertilizer, supplies (even poultry) that you bought this year, but haven’t used can be deducted. However, you can’t claim more than 50% of your total deductible farm expenses in one year.
  2. Prepaid Livestock Feed – The IRS has 3 rules it applies here:
    1. Is it for the purchase of feed rather than just a deposit? (There are specific terms to the transaction and a right to a refund, for example.)
    2. Does it have a business purpose rather than just tax avoidance? (Taking advantage of a fixed price or securing preferential treatment with the seller.)
    3. Will the deduction result in a distortion/misrepresentation of your income? (It’s a customary practice done around the same time each year that isn’t excessive for your typical income.)
    1. Fertilizer, lime, etc.
    2. Soil and water conservation
    3. Section 179 equipment and property
    4. Start-up costs
    5. Reforestation costs
    1. Accounting fees.
    2. Advertising.
    3. Business travel and meals.
    4. Commissions.
    5. Consultant fees.
    6. Crop scouting expenses.
    7. Dues to cooperatives.
    8. Educational expenses (to maintain and improve farming skills).
    9. Farm-related attorney fees.
    10. Farm magazines.
    11. Ginning.
    12. Insect sprays and dusts.
    13. Litter and bedding.
    14. Livestock fees.
    15. Marketing fees.
    16. Milk assessment.
    17. Recordkeeping expenses.
    18. Service charges.
    19. Small tools expected to last 1 year or less.
    20. Stamps and stationery.
    21. Subscriptions to professional, technical, and trade journals that deal with farming.
    22. Tying material and containers.
    23. Utilities and Internet

    Nondeductible Agricultural Expenses

    The following items are a few of the things that cannot be used as deductions on your taxes:

    1. Personal, Family, and Living Expenses
    2. Loss of plants, produce, and crops
    3. Loss of livestock
    4. Losses from sales or exchanges with people you’re related to
    5. Costs of raising crops you don’t harvest
    6. Costs related to gifts
    7. Repayment of loans
    8. Estate, inheritance, legacy, and gift taxes
    9. Club dues and membership fees
    10. Fines and penalties

    Partner With a Tax Expert to Get it Right!

    As a hardworking farmer who simply wants to pay your taxes while taking advantage of every possible deduction you’re entitled to, you deserve to be able to keep as much of your money as possible. The work you do feeds our community and the nation, and the more money that you’re able to put back into your agricultural business the better off we all are.

    To make sure you’re not missing out on valuable agriculture tax deductions, give us a call at (731) 668-4482 or schedule a call with one of our tax professionals today.

    We have over 40 years of experience helping farmers with their taxes, and we’d love to show you what we can do for you!

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