Discover 8 tax tips for the new year.
As the end of the year approaches, it’s the perfect time to begin organizing your receipts and financial paperwork to prepare for the upcoming tax season. The tax filing deadline for Federal Income Tax Returns is Monday, April 15, 2019.
Not sure where to start? Read on for our list of tax tips, and don’t be surprised if you discover you qualify for more tax deductions than you originally anticipated.
8 Year-End Tax Tips
- Report all farming income. This includes sales of livestock, produce, grains and other products you raised, distributions from a cooperative, agricultural program payments, crop insurance proceeds, federal crop disaster payments, income you received for custom hire or machine work, and gasoline or fuel tax credit or refunds.
- Report resale of livestock. According to the IRS, if you sold livestock or items that you bought for resale, you must also report the sale when filing your taxes. Your profit or loss is the difference between your selling price and your basis in the item. Basis is usually the cost of the item, and your cost may also include other expenses such as sales tax and freight.
- Deduct ordinary and necessary business expenses. With an ordinary expense considered as a common and accepted cost for the business and a necessary expense defined as a cost that is proper for the business.
- Deduct employee wages. Another item farmers can deduct are employee wages. You can deduct wages you paid to your operation’s full- and part-time workers, keeping in mind that you must withhold Social Security, Medicare and income taxes from their wages.
- Other common tax deductions around maintenance. These deductions include seeds and plants, veterinary costs for livestock, depreciation, chemicals, feed, fertilizers and lime, insurances (other than health), mortgage interest, and storage and warehousing. Unfortunately, not quite everything is deductible. For example, personal or living expenses that do not produce farm income, expenses of raising anything you or your family used, the value of raised animals that died, inventory losses and personal losses cannot be deducted.
- Consider commodity gifts. If you do not itemize or plan on giving money to your church or other charity at year-end, consider giving a commodity gift to help reduce your taxable income and self-employment tax burden.
- Benefit off a net operating loss. If your expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid in prior years, and you may be able to lower your tax in future years.
- Spread out your farm income. 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. This may cut your taxes if your farm income is high in the current year and low in the prior three years (also known as base years).
For more tax tips, check out Publication 225, Farmer’s Tax Guide.
How AgAmerica Can Help
Although no one can be sure what 2019 will bring for those in the agriculture sector, there’s no denying that being prepared is the best course of action. AgAmerica Lending is here to help support the industry – including farmers, ranchers and ag land owners – with our low interest rates, long amortizations and an outstanding 10-year line of credit. Contact us today to speak with our team of experts and learn more about how we can help meet your operation’s long-term needs.