There are several tax benefits that farm ownership provides. In addition to the tax benefits of business ownership, such as deductions, farmers also get special estate tax benefits. Tax law is constantly changing, so make sure you consult a tax specialist before filing your taxes and make sure to maximize your tax benefits.
Tax Benefits for Farm Owners Explained
Some general tax benefits of owning a business, including a farm may include:
- Deductions of all operating expenses, including purchase of equipment and utility bills related to business operations;
- Deduction of losses (so if you have a bad crop, you can deduct any business losses);
- Retirement savings plans can help you shelter some of your business revenues from taxes;
- Family members can become employees, helping to lower the tax bracket of the main business operator (or family head);
- If you use your travel or vacation time to further your business, some or all of the related expenses can be deducted from your taxable income; and
- Consult a tax specialist about your specific tax situation to make sure that you are only paying the taxes you have to pay.
The following estate tax benefits are available to farm owners:
- Special use valuation. Farmers are currently permitted to value their farm assets based on their current use for farming instead of valuing them based on the most profitable use of them.
- Deferred payment of estate taxes. To make sure that farmers do not lose their farms because of taxes, farms are generally able to defer payment of estate taxes.
- Conservation easements deductions. Farmers can deduct a percentage of the value of any land they own which is subject to a conservation easement from the value of the farm estate. This can drastically reduce taxes.
- Minority interest and marketability discounts. Property that is owned by multiple parties with minority interests or that is otherwise difficult to sell can qualify for special discounts in value which helps to reduce estate taxes further.
Getting Tax Help
If you are trying to work out the tax advantages of owning a farm or agricultural land, you can get the assistance of a wise tax attorney who can help you figure out the best tax strategies for your farming operation. Tax law can be confusing. An attorney who has expertise in this area can help you make sure you do not end up paying too much in taxes.