Registering as a farm

Candace · #1 02/21/10, 10:07 AM

HI, I don't even know if that's the right terminology BUT I have been trying to convince my husband that we need to go to the courthouse and see what it would take for our place to be qualified as a working farm... small, mind you, but working non-the-less. We raise chickens and, in the fall, turkeys. I sell the eggs (mostly I give them away!) but I also sell meat chickens and turkeys. In my state, Indiana, I believe you have to demonstrate $1,000 worth of sales/profits to qualify. We meet that requirement but I am thinking there may be tax breaks by qualifying as a farm such as being able to claim some of our operation costs. Can you tell me what you have found if you are a small producer and are considered a "real" farm?

oneokie · #2 02/21/10, 10:35 AM

Here in Oklahoma, one has to have $1,000 of sales. We have to go to the FSA (Farm Service Agency) office and fill out their paperwork, then take that to the county Assesor's office and apply for an agricultural tax exemption. Saves sales tax on items used in the production of ag products. We also have a 10 acre minimum requirement to qualify the property as a "farm" to qualify for a lower ad volorem tax.

big rockpile · #3 02/21/10, 10:36 AM

Here in Missouri all you basically need is 5 acres and get alot of breaks.

big rockpile

Common Tator · #4 02/21/10, 10:52 AM

We registered with the Farm Service Agency of the USDA. There are other benefits as well. They are the only place you can get crop insurance for apples, and we have an apple orchard. We declare our ranch income on our taxes and deduct our expenses.

http://www.fsa.usda.gov/FSA/stateOff...&topic=landing

Click on your state to get started.

I don't know what other requirements your state or local government may have.

Darren · #5 02/21/10, 11:10 AM

As mentioned by others, the Farm Service Agency located in or near your county seat is the first step. They may be located in a service center along with the local NRCS office. Often they have offices in the post office building or other federal office building.

The $1,000 number was set by the USDA. WV follows national guidelines (USDA) for what constitutes a farm. You may have a problem depending on how you plan on hitting the $1,000. That isn't the profit. It's the total value of farm products produced and sold AND produced and consumed on the farm.

If you plan on hay making up the $1,000 the FSA will determine via aerial photos whether you have enough acreage. Ours is made up by a combination of hay and poultry.

Registering as a farm means the USDA expects you to fill out and return a periodic farm census. If your property is registered as a farm with the USDA it makes it difficult for the county to not allow a farm exemption.

texican · #6 02/21/10, 11:27 AM

Around here, you'd want to go to the taxing authority, and request an agricultural exemption. For some reason, in Texas, most of the Tax Assessor's offices are located away from the courthouse proper.

I've had land status changed... didn't have to show any paperwork... just go in and tell em I want an ag exemption.

Personally, I'd be cautious about volunteering too much information. Just tell em you want an ag exemption. Get all technical with how much money your pulling in, and they may decide you are a business!!!!! and your taxes would go UP!!!

I was in the Tax assessors office last fall, doing some research... guy came in to protest his taxes... ---------- kept going on and on... and the clerk was writing it all down... she looked at me sitting over on one of their work tables, I rolled my eyes, she shook her head, and kept writing. When he got through with his self revealing diatribe, she said they'd need to send the appraiser out for a visit. He "thought" he was getting what he wanted... she said no, the appraiser was going to have to come out and itemize the business the guy was running out of his garage, and his taxes were going to go up, by several times. AND, the possibility of fines were possible, as ALL business have to 'declare' within weeks...

Mike in Ohio · #7 02/21/10, 12:25 PM

A few thoughts.

If you are operating in a businesslike manner, all you have to do is file schedule F with your Federal Taxes in order to deduct operating expenses. Speak with your accountant. For depreciation you file a different schedule (forget the number off the top of my head).

For agricultural use valuation (reduction in property taxes) check with your county auditor or your state department of agriculture to find out what your state does.

As far as FSA, I don't have much use for them. If you want to feed at the government trough then that is a place to look.

Mike

Beeman · #8 02/21/10, 12:49 PM

You mean a phoney farm.

Candace · #9 02/21/10, 01:12 PM

Quote:

Originally Posted by Beeman

You mean a phoney farm.

Sorry Beeman, I don't get what you're saying. I've seen several discussions here on what you can call a farm. Some think you should have several acres, others think you should be raising certain crops or livestock. I think if I am conducting farm activities, then I'm a farm.. just maybe not as big as the next guy. I only have a few acres but my husband and I have worked very hard to "rescue" an 1800's barn and farmhouse and put what space we have to good use. We could easily support ourselves and our 5 kids and their families if we needed to. So, phoney farm? Depends on your perspective.

WisJim · #10 02/21/10, 03:19 PM

Depends on what you mean by a "farm". Do you want to be zoned as a farm--that is a local or county situation. Taxed as a farm? Check with your tax preparer, and show that you make money from farm activities a certain number of years. Back when we were actively making some money from farm activities, it was the Federal tax return farm income that decided whether we were "really farming" or not.

Darren · #11 02/21/10, 03:23 PM

I haven't taken part in any FSA programs. However they are the route to have your property considered as a farm by the USDA. In WV the county assessor determines if you get the farm exemption. They hold to the same $1,000 the USDA does. Here they want more info than the FSA. You have to itemize livestock and crops for them every year to prove to them you deserve the farm exemption.

The people that owned the main parcel before us never qualified. We do since we now have about twenty acres of pasture including another parcel which the county commission "Joined" to the other for tax purposes.

Jan in CO · #12 02/21/10, 03:39 PM

Several years ago, I went to the USDA office and filled out paperwork and they sent us a letter saying they considered the activities we did here as 'farming'. I then sent a copy of that letter to the county assessor with a request that our property be declared ag so we could get the ag exemption on our property taxes. He refused, on the basis that we didn't raise 90% of the feed needed for our animals'. I in turn told him the 160 acre farm across the road would find that frustrating, as they can't raise that amount of feed for all their cattle, and buy 100% of their hay. Didn't matter, he wouldn't reconsider. I'm going to try again, tho. Start with your USDA office, fill out the paperwork, and then when you do your taxes, file as a farm. Keep good records, mileage, etc. Jan in Co

norcalfarm · #13 02/21/10, 04:40 PM

I've been trying to figure this out as well.

The IRS 2009 Publication 225 simply states: "You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards."

Do you need to register with the USDA only if you are claiming depreciation or property taxes? If one was simply to claim income and loss from the farm, do you still need to register with the USDA and your county?

Jan in CO · #14 02/21/10, 05:25 PM

Two different situations. If you are talking federal/state INCOME taxes, and filing as a farm, NO, you don't have to involve the USDA or FSA. That is only if you wish to claim agricultural exemptions for local property taxes. Not all states or counties will require that, either. There are tons of properties in this county that no longer are farming, but their designation as a farm is still on the books. The county assessor told me they were 'too busy' to go out and redesignate all those properties, yet the county is crying for money. Doesn't make a lick of sense to me. Jan in Co

Kmac15 · #15 02/21/10, 05:39 PM

we had great plans, with 5 bee hives, 45 chickens and selling all the eggs I could. Planted a large garden and took the extra to a vegetable market. Raised 6 pigs a year and sold the extra. Filed for, and got an ag exemption for our taxes and filed as a farm on my income taxes.

Then 3 of the hives died, passion flowers took over the garden, my pig guy went out of business. I went back to the county tax office and told them I was no longer a farm (didn't seem fair to not let them know) and they asked if I raised anything, so I told them sure, a few chickens. They said that was a farm in their eyes and they would change it if I sold the property. I figure I will get hit when they get desperate enough for money to come and look.

oneokie · #16 02/21/10, 05:46 PM

Quote:

Originally Posted by Jan in CO

The county assessor told me they were 'too busy' to go out and redesignate all those properties, yet the county is crying for money. Doesn't make a lick of sense to me. Jan in Co

They have you in the system at the higher tax rate. Also why they won't change it to agriculture as you stated in post #12.

rambler · #17 02/21/10, 08:30 PM

Income taxes: File a schedule F, you can deduct items you buy to keep the farm going - fertilizer, feed, animal housing, fence, tractors or plows used for the farm operation. You also need to list your income from the farm.

If this is more of a hobby and you have 'a real job' then you will be viewed as hobby farming, and it is difficult for you to get by spending more money on the farm than what you make from it. It is wise to show a profit 2 out of every 5 years on the schedule F. This is not an actual rule, but kinda what they go by. If you are really, really only farming, then your schedule F would be quite busy document, and you need better advice than a single message in a forum can give you. There is so much more to this, but I've hit the basic to get you started. But you wouldn't need anything from the courthouse for this - just keep your records and file a schedule F.

Sales tax: If your state has sales tax, many states allow you to not pay sales tax on items you buy for use with your far, Like feed, seed, fertilizer, special tools, etc. Every state is slightly different, some you need an ID, some you just say farm-use at the store, etc.

Property tax: Those states that have rel estate taxes, some will have 2 different tax rates. A higher one for residential/ developable land, and a lower rate for 'farm land'. Again, each state is different on this, but if you can go to the court house & meet the 'farm use' designation it could reduce your property taxes.

There are the three types of taxes a farm deals with. You didn't really mention which one you were asking about?????

--->Paul

SueMc · #18 02/21/10, 08:52 PM

Here is what I found for IL. http://www.revenue.state.il.us/Publi...bs/Pub-122.pdf

I went to the IL Dept of Revenue to find it. I assume other state's dept of revenue will have similar types of publications. We just purchased 35 acres last fall with no buildings but 13 of the 35 acres have been in crop production for a long time so the property is considered a farm. As rambler stated, there will be different tax rates for different use areas on this land when we build. Reading this publication was painful but interesting. Every type of building is listed with it's tax rate. I'm surprised that I didn't see a rate for a dog house (NOT LOL!).

ET1 SS · #19 02/22/10, 08:28 AM

Here the state does give a tax break to 'farmland'. To qualify you must document that you earn over $2,000 per acre every year for the past 3 years. Ten acres must produce $20k of product. A hundred acres must produce $200k.

Most farms that I know [properties where their primary source of income support comes from farming] do not qualify.

They produce farm products and sell them, but get no breaks on property tax.

uncle Will in In. · #20 02/22/10, 10:00 AM

Candace, Indiana sets it property tax rates that you pay to your county by the appraised value of each property set by the county assesor. You can file complaints with the assesor and try to get the tax reduced but unless they have made a gross mistake in their assesment, it's a waste of time. Your house now has a property tax hike limit which is better than the limit set for farm ground. I live on a working farm. They lowered the taxes on my house this year, but raised them on the farm ground. Even with the wonderful tax cut they are bragging about, I will have to pay more taxes.

The benifit on taxes comes with your federal taxes. If you have your tax preparer to set you up as a farm. you can deduct the depreciation on all the outbuildings, fences, tile ditches, and your farming equipment. All your expenses to opperate your "Farm" are deductable. The IRS thinks you should show a profit 3 years out of 5 or your just running a hobby farm and you can forget the loss off your total tax bill to them. The deductions you would be eligable for would be way more than your sales from your farm. Now you'd have a hobby farm. Sorry. <>Unk