Farmer Tax Breaks

This next tax return I’ll need to start writing off farm expenses. I have a lot to learn and read up on in this regard. I know there are many tax advantages to being a farmer (which still hardly offset all of the financial disadvantages… but hey, you take what you can get!).


We are already enjoying one advantage, and that is the “open space agriculture” tax break that is available in our state and county. The rule here is, if you show an agricultural gross income of $200/acre/year every three out of five years, the county will calculate your property’s taxable value based on its “current use” and not its “best use.”


This is intended to help offset the fact that (at least until now) property values were skyrocketing, such that farmers could not justify keeping the land in agricultural use and paying high property taxes when the land was worth so much for residential development purposes. Add to that the falling profitability of traditional family farms and farmers’ kids not wanting to carry on their family’s legacy, farmers were selling land like crazy to developers in the last two decades.


The state and county realized they had to stop this trend, or there would be no farmland left! So, this tax break was invented-no matter how much your land would appraise for as commercial or residential real estate, it is taxed as if it’s only value is as cropland or graze.


Now that the farm is up and running, I think we’ll be able to meet the $200/acre/year rule with little difficulty. We have 12 acres in open space, so we have to bring in $2400 a year—if we have a good lamb crop, that will do it right there. Note that this is gross profit, not net, so you don’t even have to show that you are making money on your farm. But I had been starting to feel some pressure, as it has taken two years just to get the place back into farming condition, so technically we must show this profit in the next three years. But I also don’t think anyone checks real often, as I’ve seen many farms in open space status where clearly no farming has been done recently. It’s probably one of those laws where unless someone turns you in, like a nasty neighbor, it does not get noticed….


So, anyway, back to income taxes. I believe that I can start writing off the tractor, tractor fuel, fencing expenses, feed for the ducks and sheep, and many other expenses. I’m also wondering whether I can write off the dog and cat food, since the dogs work on the farm, and the cat is a mouser. I’ve started keeping better categories in my Quicken records to break down all the various farm expenses, to make for easier reporting in the long run. But I feel as though I probably have a lot of reading to do, to master the subject of tax write-offs available to farmers.  

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