Discover five quick tax tips to help take the stress out of filing yours this year.
Tax season is upon us, with Tax Day – Tuesday, April 17, 2018 – quickly approaching. Are you ready?
If not, don’t panic. We’ve compiled a list of five things farmers and ranchers should keep in mind during this potentially stressful time of year. Read on to ensure an easy-breezy tax season!
- Tax rules and regulations change each year, so be sure to read the IRS Farmer’s Tax Guide carefully. This publication is where you’ll find any updates to existing rules and new information regarding how the federal tax laws apply to farming.
- Insurance payments from crop damage count as income, and these payments should generally be reported in the year they were received.
- Farmers can deduct ordinary and necessary expenses they paid for their business. Depreciation expenses can also be deducted. For example, farmers can depreciate most types of tangible property (except land) such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Additionally, farmers can depreciate certain intangible property like copyrights, patents, and computer software.
- If your expenses are more than your income for the year, you may have a net operating loss (NOL). You can carry that loss to the two years before the NOL and deduct it, and you may receive a refund of part or all of the income tax you paid in prior years, or you may be able to reduce your tax in future years. You can also carry forward any remaining NOL for up to 20 years after the original NOL year.
- You may be able to average some or all of the current year’s farm income by spreading it out over the past three years (also called base years). Farm income averaging may cut your taxes if your farm income is high in the current year and low in the prior three years.