Schedule F filing question

[GunMonkeyIntl]

I know I will need to get a CPA to do my taxes this year, but I'm trying to get a generic understanding of how this works.

I got my sales tax exemption number from my state, and a farm number from the USDA, and will have to file a Schedule F this year. I am buying a tractor, and my payments made this year will total about $3,000. I'm planning on spending about another $1500 for kicking off a small bee operation. There is no way I am going to have $4500 in revenue for the year (or likely next year for that matter), since the bees take time to get up and running.

When I write off the equipment expenses, do they only reduce the taxable income of the farming part of my income (which will be nothing for right now), or do they reduce my overal taxable income (including my day job)?

[Molly Mckee]

They do reduce your overall income. Get a schedule F and read it and the directions. the IRS has good instructions and a good farmers tax guide.

[Melissa]

When deducting the tractor it doesn't matter how much the payment is, there is a specific percentage that you are allowed to depreciate each year. You can deduct more if you use what is called a 179 deduction though. There is another form- 4562 that you use in conjunction with the Schedule F.

If you show a loss on schedule F, it does reduce your total income.

[GunMonkeyIntl]

Thanks, all.

[clovis]

Most of the forms and instructions are available online at the IRS website.

[DEKE01]

On the tractor, you can use Section 179 Form 4562 to write off the full amount of the tractor in the first year or in succeeding years till you have offset any income. Lots of rules around this, but your CPA will know off the top of his head. Most all small biz use this.

There is an upper limit which varies from year to year. Not sure what the 2013 limit is but it is probably either $139K or $500K, probably well more than your tractor plus other large equipment purchases.