what is possible "farm expense"
 

i have no clue where to ask this i am just curious how far you can go writing stuff as farm expense?
like for instance i wanted a plasma cutter/tig welder/compressor to "repair farm equipment" and what ever else i can think of.
if i wanted to charge a lean to green house against the house as farm building need to start seedlings etc lol.
can i claim Guinea fowl and over wintering cost as pesticide? not like i want to breed and sell 1000 of the things. i really dont care to eat them dogs might want to eat the culls after cooking.
dogs as a security system? or predator deterrent.
can I wholesale? i had a freind that had ~14 large greenhouses retail and wholesale. he always told me funny he never had a retail plant die(wholesale could be written off)
.. i could ramble for ever
thanks much all, again

not that i want to really "cheat" but the super rich shouldnt be the only ones to maximize potential deductions

An accountant that is familiar with agricultural tax returns would be the one to ask those questions.

I can't answer your specific questions, but what I do is itemize every farm expense on Quickbooks (we pay by check or debit card) and then at the end of the year I give a copy of that to our accountant and let him sort it out. That's what we hired him for and he does an excellent job!

Okie's right. An accountant is the best one to ask this of. But here are some generic guidelines.

First and foremost, to count something as a business expense, you need to have a business income. Are you going to be filing a Schedule F? Are you planning to make a profit one year out of five (or whatever the magic ratio is for ag. enterprises).

You can only claim an expense against something that is generating income. For example, my husband was a 1099 contract laborer when he did day-work. Consequently, his horse care was an expense. Our younger border collie was an expense. His mileage (specifically related to a job, only, of course) was an expense, and so on.
However, our older border collie, who serves a purpose here at home but is too old to keep up for a full day's work, is NOT an expense.

While I'm not the one to ask, I don't think you can count stuff like dogs = security and birds = pesticide control
But if you're making $ off them (income) i.e. selling eggs, meat then I think you can count their feed and costs. Check into it you can count animals as expenses if you are a farm

See Schedule F of the 1040 available directly from the IRS.

http://www.irs.gov/

http://www.irs.gov/instructions/i1040sf/ch01.html

http://www.irs.gov/pub/irs-pdf/f1040sf.pdf

It lists everything quite clearly. It's a nice short form.

Cheers

-Walter
Sugar Mountain Farm
Pastured Pigs, Sheep & Kids
in the mountains of Vermont
Read about our on-farm butcher shop project:
http://SugarMtnFarm.com/butchershop
http://SugarMtnFarm.com/csa

If you use it to help make money its deductable.
Accounts will always err on the side of covering their OWN butss and deny EVERY possable deduction.
The shed radio is deductable. any fowl and their feed would be.
Every mile you drive to anything thats farm related is.
AND THE BEST ONE?
If you HAVE to live there for a employers benifit its deductable...so if ya have to be at the farm day and night to protect lambs and such........
But thats really pushing it!

There are many situations and ways to work deductions. This is not cheating, it is the game that Uncle Sam set up, and we need to play it. It's the hand the govt gives us.

An accountsant familiar with farm taxes is well worth $400 a year....

However, to start with, are you earning income (selling stuff) from your farm?

If all this is for your own use and you don't sell anything, then it is difficult to claim anything as an expense.

You need to be in business.

Then, if it is a bit of a hobby job, and not your primary income, you can't deduct more than you make.

If this is a serious, long term business you plan to grow larger & make more from, then it is worth persuing the deductions.

You have one year deductions (fuel, seed, fert, etc.), mid-term deductions (machinery & temp buildings, over 3-7 years...) and long term deductions (buildings, tile, stuff that lasts 20 years+).

To play the game tho, you need to be selling stuff, and have a plan to keep this a business and grow it steady or bigger.

Things like building deductions will last - or haunt you - for 20 years, so you need to be in farming for a long term to make use of those.

Cat food specifically is _not_ deductable as a pest control, that's been therough the court system, so those things you listed might not fly.... I don't make the rules, I'd see it as you do.

If you are growing food for yourself, and not to sell, then it will be very hard to deduct anyhing. IRS feels you are just reducing your grocery store bill, and not farming as a business, and don't have any business expenses...

If you only sell small amounts of excess that dosn't amount to $1000 and never will, the paperwork can be more of a hassle than it's worth, as you can't deduct more than that >$1000, which would save you 15% and 15%, or less than $300.

A small time seller of garden produce can get kinda odd with sales & tax issues - often you are exempt from state stuff, but need bettr records thanjust in your head... Wholesale vs retail, becomes very individual as to how your fit the templates available...

Tell more of what situation you are in, and we can give more 'free and not worth more than you paid' advice. :)

Edit: The tools can be a good farm expense deduction; but you do need to be a business bringing in income. Forgot to menton the tools part. Smaller might be yearly expense; bigger might be mid-expense.

--->Paul

STICKY BUTT <> You have an active imagination. I'd really like to see the IRS geek when he checks your return. I'm sure they will be entertained.

sticky burr... sticky butt...
TomAto, TomAHto. lol

Can you count some of this off the year you start, but haven't sold anything yet? I have a few sheep so I can sell lambs. I didn't sell lambs last year but can I count the expense of the sheep this year? Same as for berry plants, etc? I plan to make a profit in a couple of years, but right now- I am just getting set up. When do you start counting the expenses?

I respectfully disagree! We are raising barn cats in a definite breeding operation. Market is a little depressed right now, but we're building up stock and hope to show a profit very soon! :banana02:

yea i am setting up trying to find financing for land and the land i am currently looking at ~58 as the smaller one i was looking at has no acess and had to cross like 3 properties to try to set in a road but yes i wish to profit but its a claimable thing.
there will be many revenue streams as possibe. the home plans i have is 2 bed and 3 car down stairs and i want to put a 4 bed 2 or 1 3/4 bath upstairs as section 8( the allowable asking total here is insane) but it can be reopenable to down stairs sad i can get more for goverment low income than regular.... for now
although heritage turkey, culled beef, direct (hippie)restruant sales as this is a tourist trap area, along with csa probally perhaps some at the farmers market a oil seed crop that should be 1000 gal a year(low input) food grade but i will eat pretty much what ever i want off it :) i will probally find a smart cute young lady to hang at the market and chat up customers lol.

i am a simple person but i want to pay down the bank asap as i dont want to be a bank slave for 30-45 years. i should be so lucky to live that long. and have enough not to have to sell the homestead if i break a arm. like said many income streams to make sure its covered. sure i'll be working 18+ hours a day but i will be working for me

In general you must claim the tax deductions the year you place the items in service. Whenever it is available to use, and you have signed for it.

If you bought it in 2009, you _cannot_ claim it in 2010 taxes - needed to start it going in 2009 tax records.

It is common for a business, including farming on a schedule F, to have a lot of expenses the first 2-3 years before it shows much income. That is allowable.

There used to be a rule that in now just a guideline, no longer a hard rule; if you show a profit 3 out of 5 years (generate more income than your deductions) it will be viewed as a business, and you will be fine. Currently you need to prove to them that you have a business you plan to grow into a positive, money-making operation if they ever ask you. That means records,a plan, a reasonable expectation that following your plan will return more money than it costs once it's fully operational. Yes - this turns into grey area, but really isn't that hard to figure out - are you trying to make a business or are you trying to claim a money-losing hobby as a deduction?

Now here will be your problem: You ain't making anything with your business, so you have no income to use the deductions... Ah ha, they got you. Wasted deductions... You can pro-rate the deductions over a 3 or 6 year period, but means amending your other returns.

As we've mentioned, a good farm-familiar tax preparer is worth a lot on all this. Filling out the forms isn't too bad, but planning for it is the hard part.

--->Paul

Tax deductions, like the supposed 'stimulus' for small businesses only help if you have income and are making money in the first place.

Now there's a novel thought! Actually making MONEY off a small farm! :bouncy:

The problem with a small midwest grain farm, is ya lose money 2 or 3 years, amke goobs of money one year, nd again lose money 2-4 years.....

The govt doesn't care about your losing years they just help kick you when you are down, but wants to claim 40-50% of your income on the one great year.

One needs to understand and play the tax game to level that out.

Peple who complain about rich farmers tend to be like the govt, and only 'see' the one good year, never pay attention tot he 2-4 bad ones that make the good one just a break even for the whole operation.....

--->Paul

Off topic, but why would you not eat a guinea? We ate them all the time growing up...all dark meat, but tastes fine.

I know that we write-off our dog, his vet bill, meds and some of his food. We have a small herd of rabbits that we sell wholesale and retail to the pet and show industry. We live in the woods and he is absolutely necessary to the well being of our rabbits. He will kill a raccoon if it dares to come over the fence.

He also will help chase down an escaped rabbit and bring us tiny babies that occasionally slip through the wire. He does this all without any injury to our livestock. This is a work dog and a true write-off. I hope this helps someone. Darkwater

i dont know its not one of the hey that looks yummy foods , guinnea fowl that is, chickens beef culls, piggie rabbit are. i will probally try a guinnea that is too agro.
sounds like a awesome dog dark may i ask what is it? not like a want to write off a toy poodle or chi.. but if possible to claim legit IMO costs as expense it will help.. hey a want a hobart 5 qt mixer i might be able to get away with it for farm use bread and butter for CSA cause i hate i'd hate to claim 2k income to get one

To answer some of the questions - If you are looking at a business write off:

Yes, you can have expenses in one year and no income that year. (If you buy calves to feed out and keep them for a year and butcher them the next fall, you won't have any income until the following year. Or if starting out a meat herd with calves to grow up to breeding adults it would be several years until you actually had extra cows to butcher and it might be a few years until you have income.)

As for guineas for pest control - I'm not so sure that would be legal to post the guineas and their feed as "pest control" (I'm thinking the IRS isn't going to buy that.) But if you buy guineas and then raise them and sell some - either the adults for meat, or adults that somebody wants to buy or babies that someone wants to raise - then yes, you can deduct the cost of the guineas, and their feed.

As for the dogs, that's probably a gray line. If you can PROVE to the IRS the reason for the animal is predator control you MAY be able to get away with a write off. However, I consider that as preditor control / pet, so don't list the dog or it's expenses.

When in business, I think it's a good idea to hire a good tax preparer familiar with business taxes. KEEP GOOD RECORDS OF EVERYTHING!!!!!!!!!!!!!!!!!!!!!!!

KEEP RECORDS AND RECEIPTS OF WHAT YOU BUY OR SELL. If you buy something from a person that will be listed as an expense - either have that person write out a receipt or YOU write out a receipt and pay with a CHECK.
Keep a ledger with all EXPENSES and all INCOME and let your tax preparer decide if it's legal or not. (They want you to get the most rebate you can, but they aren't going to cheat and have their own rear end in a sling for you either.)

Don't give your tax preparer a shoe box full of expenses receipts and income receipts. Keep everything organized along with your ledger so if there is any question (by your tax preparer or the IRS after it's sent in) EVERYTHING is right there.

Guineas would be deducted as livestock, not insect control. Dogs are not deductible unless they are 100% working dogs and never pets. A sheepherder who lived out with the flock could deduct his herding dogs. Most farm dogs, no, and it is not worth risking the IRS taking a closer look for the few dollars a month the dog costs you.

Get a schedule F and look at it. It'll show you the categories of things that are deductible.

Large purchases are always depreciated not expensed, except for livestock and feed.

A new greenhouse or tractor is depreciated. A truck and trailer of hay is expensed in the year you buy it.

You can of course offset income in one area with losses in another.
You can reduce the taxes on your job income with losses on your farm.