Farm tax status question

[mikieb]

A few random thoughts on this.....

From a very experienced tax professional, I quote..." the federal government dose not have a definition of a farm anywhere in the tax code... no place in the tax code... you could have a grow operation of alfalfa sprouts in your basement… and that is farming"

In Wisconsin, pasture land is taxed at the cheapest rate... Two goats in a large fenced area can save you thousands over a few years...

"The going tax rate for private property is the same for every one... it's the fairest way to tax real property.... " says an elected official... I call BULL$HIT... I have a 115K house and I pay 2k a year in property taxes.... two miles down the road is a large house on the river for sale for 725k and his annual property tax is just a hair over 5k. Do the math on that... the rich people pay less tax all day... I pay more in property taxes on my little 115k house than some million dollar dairy farms... so go after the agricultural tax rate and you will come out ahead.

You might want to fence 3/4 of your property and run some sheep and hang a sign out front "Sethkulh Farms" and get your place reassessed.

 

[Rapptor]

From an income tax perspective, hobby activities are unable to "write-off' losses so it is important to distinguish between a hobby and a business. As was mentioned previously, businesses must establish profit motive and an important part of that would be to generate income. According to the Internal Revenue Code you are presumed to be in a for-profit activity if you show positive net income in 3 out of 5 years. Beyond that, IRS uses 9 factors when determining whether you are engaged in a hobby or business (https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses).

 

[shootbrownelk]

A friend of mine had 10 acres on a river. He got some sheep (I forget how many he had to have) I think it was around 20 or so. He lost money sheep ranching every year, he got to deduct vet bills for his horses/sheep and dogs. Feed for the horses, sheep and dogs. Fuel deductions for his diesel truck, and tax free diesel fuel. He had business deductions up the wazoo. He paid diddly-squat in property taxes as it was agricultural. There are lots of perks in agriculture if you know how to play the game. He sure did.

 

[PrairieHunter]

Just plant hemp, and when the elk start eating it call FWP and get some depredation tags, take advantage of the tax benefits, etc... Claim a complete loss on the crop due to elk for a couple of years while you write off some expenses.

 

[Steiny]

We own several farms and I've yet to see any big home run tax advantages. A couple things you can do:
a. Large pieces of equipment such as tractors can be purchased for the farm without paying sales tax. This could include a truck or UTV if your CPA will go along with it.
b. If you have significant income a lot of farm spending can be write offs, to bring your taxable amount down. Things like; fuel, tools and materials for repairs, drainage projects, farm buildings, etc.

 

[kmott]

What are the requirements for turning a property into a farm for the purpose of changing taxes. is there a requirement for acreage? Number of animals? Must show profit?

My wife and I are looking at getting some equipment to improve our property, but looking into the farm route for the write offs seemed worth my time.

I might have to sit down with an accountant but was wondering if anyone on here has any experience with this.
(not sure if this cleared it up or not.)

I think in Idaho all you gotta do is grow a tomato and say you took a loss on it.

haven't got a clue what hoops the montananites make you jump through.

 

[Nemont]

Citizen Knowledge Article View - Citizen

mtrevenue.gov

 

[kiwi hunter]

im pleased to see that human nature is the same around the world,,the politicians try and screw us for as much as possible to have a higher lifestyle and feel good about it and its our right to lessen their impact on out lives
a little something on farming
at the age of thirty i sold my home in town for 17k and brought a wilderness block of 440 ac for 40k(now i could hunt hogs and goats to my hearts content)
for the next 24 yrs i worked from dawn till dusk and then sold the place for 400k,,moved here n there until last yr and brought a 20ac block for 745k
went on the google the other day to value my old home in town to see its now 700k,,humans are crazy and thats why you have Trump and we have socialism

 

[npaden]

Rules are different in Montana than Texas but it looks to me that you have a chance to make it work.

2 of the areas that you have the highest chance to make it are with fruit trees and bees. You could plant a decent orchard and run a few bee hives and you should be able to hit $1,500 of revenue fairly easy. With 24 acres you will be able to set aside an acre or so for you house and still have the 20+ acres needed to qualify for agriculture use. It will take work though and not just sitting around enjoying your property.

With no state income tax here in Texas property taxes are high enough that I actually save more in property taxes by having my land classified as agriculture use than I make in revenue from it.

As far as "hobby" farming, there isn't such a thing. I would be very careful in how you reported your income and expenses. Schedule F is for active farming and it is generally understood that you need to have income 3 out of 5 years from farming or the IRS might have a problem with it. This is an area that many people have beaten up the rules and deducted expensive toys and other things calling it farming that really wasn't. BUT, if you actually are trying to make a little money off your land and are selling the products with the intention of actually making money, you can call it farming. Just keep up with your revenue and expenses and you should be fine.

I personally file a Schedule F but I have 160 acres in one county and live on 75 acres. I don't make a lot of money on it, but I do make a little. I do save a bunch on property taxes over what it would be if it was taxed on market value.

 

[2rocky]

Nemont beat me to it on property tax.

Paden gets the win on Schedule F

Lot of good free advice you got here...

 

[Damien]

I'm not sure what gives you the actual status to receive farm tax, it might be how how your official business is written up and how income is made off of your property like Big Fin said. Another benefit to the AG tax is sales tax is a different rate, that's not an issue in Montana, but when I buy parts and equipment for the dairy I work for here in California the sales tax drops from 7.5% to 2.25%. It doesn't apply at a place like Lowe's, but tractor shops, local hardware stores, hydraulic shops etc all give us the Ag tax rate. It also qualifies us to get off road diesel delivered, which is a huge difference in price with how high taxes are on fuel in California.

By the way, yes, if you officially register the farm status, that is, your profits for further work. Fuel and the purchase of equipment. Here are the options - https://pivotalcapitalcorp.com The most important thing is to learn to remember to record all your expenses on the farm. From the purchase of equipment and fuel to daily consumables (work clothing, mittens). This should all be deductible. Talk to your accountant. Write down the main points so as not to invite him to a new consultation because of every trifle.

 

[Damien]

My wife and I own 24 acres in Western Montana. Looking to find more information on Farm tax. Any of you have your property under this plan. Wife wants to start a "hobby Farm". Is there any benefits or drawbacks that you all know about?

What did you end up with? For me personally, raising livestock for sale is a pretty tough job.

 

[sethkuhl]

currently no progress. We are currently looking at bees or Buffalo. We lost our tax man, but are at the time of year for getting a new one.
On the topic, it is always so easy to look back and say we should of done (XYZ) Trying to get ahead. Thanks for the advice that was given!

 

[npaden]

I’m doing bees and fruit trees plus have some acres in CRP.

I’m only at 2 hives right now but I’m planning on increasing it to 6 hives this year.

 

[Damien]

I always wanted to ask ... Is it true that the bees recognize their owner and don't sting? I am a little afraid of these small guys in large amount..

 

[npaden]

I always wanted to ask ... Is it true that the bees recognize their owner and don't sting? I am a little afraid of these small guys in large amount..

I don't think they recognize their owner, they just respond to certain things that they like and don't like and for the most part bee keepers are smart enough to do more of the things that they like and less of the things that they don't like. They don't like dark colors that look like a bear coming to steal their honey, they don't like fast movements like trying to swat at them, and they don't like CO2 like your breath or the exhaust from a vehicle. They don't really like windy cloudy days so don't mess with them on a windy cloudy day, etc. They are fascinating creatures and do some amazing things. The interaction with the queen and how they cooperate is amazing.

I was stung 6 times this first year of bee keeping and for the most part it was due to mistakes on my part or just being impatient. Half of the stings were when I was just doing something super quick and didn't bother to suit up or use my smoker. The other half were generally me doing stupid things like scooping up several hundred bees with my bare hands to move them out of my way and one of them stung me. Or when I was on my knees watching them interacting with a new queen with my face about 12" from the top of the hive without a veil and one flew over and stung me on the nose. Things like that. For the most part you just stay out of their way and use a little smoke and make slow careful movements and they act like you don't even exist.

Different breeds of bees also have different attitudes. Both of my hives right now are Italians and they are supposed to be about the calmest.

 

[madtom]

I don't think they recognize their owner, they just respond to certain things that they like and don't like and for the most part bee keepers are smart enough to do more of the things that they like and less of the things that they don't like. They don't like dark colors that look like a bear coming to steal their honey, they don't like fast movements like trying to swat at them, and they don't like CO2 like your breath or the exhaust from a vehicle. They don't really like windy cloudy days so don't mess with them on a windy cloudy day, etc. They are fascinating creatures and do some amazing things. The interaction with the queen and how they cooperate is amazing.

I was stung 6 times this first year of bee keeping and for the most part it was due to mistakes on my part or just being impatient. Half of the stings were when I was just doing something super quick and didn't bother to suit up or use my smoker. The other half were generally me doing stupid things like scooping up several hundred bees with my bare hands to move them out of my way and one of them stung me. Or when I was on my knees watching them interacting with a new queen with my face about 12" from the top of the hive without a veil and one flew over and stung me on the nose. Things like that. For the most part you just stay out of their way and use a little smoke and make slow careful movements and they act like you don't even exist.

Different breeds of bees also have different attitudes. Both of my hives right now are Italians and they are supposed to be about the calmest.

That's really interesting. I might dabble in that one day if we ever have the space. Have you always been around beekeeping or how did you get started?

 

[npaden]

That's really interesting. I might dabble in that one day if we ever have the space. Have you always been around beekeeping or how did you get started?

Not trying to sidetrack the thread, but I just got into it this past year. Never been around bees at all before that other than completely wiping out a possibly africanized hive down on my hunting property a few years ago.

It can cost a bit to get started, most people buy starter bees and hives, you can build your own hives as well but it kind of comes down to time vs. money type of thing. You can also catch swarms for free if you have a lot of native bees in your area. The wooden ware to get a hive started probably costs around $200 per hive, the equipment probably costs around $100 (smoker, veil, gloves, etc.), and the bees probably cost around $200 per hive if you are buying them. I haven't kept very good track but I would guess I have about $750 into my 2 hives right now.

I'm going to put out some swarm traps this spring hoping to catch some local bees and I'm going to buy some more bees from a different source to help with the genetics of my bees. After that I should have enough that I will be able to just make more bees from the ones I already have.

There are lots of different ways to make money with bees. Wax, Candles, Lip Balm, Honey, selling bees to other people, etc. The first couple years are going to be more focused on building up your hives than making money IME. I didn't make a penny this past year or harvest any honey as the focus this year was just building the bees population up enough for them to make it through the winter. This year will be similar as I will be focused on going from 2 hives to 6 hives. I might end up with a small amount of honey for personal use this year but next year (my 3rd year) should be when I see good things start to happen $ wise. An average hive can produce 100 pounds of harvestable honey each year and depending on how you market it you can get anywhere from $5 to $20 per pound for it. Most folks say if you really add up all your time and expenses you don't end up with much of a profit on a per hour basis, but I'm hoping that we might end up with enough between our fruit trees and the honey to encourage my son a bit to have him helping out with it.

 

[npaden]

If keep your eyes open looking on Craigslist, etc. you can find used equipment sometimes. I picked up enough stuff to expand to at least 6 more hives a few months ago for $350. Be careful buying used, but it can save you quite a few $.

 

[Damien]

[B]npaden[/B], Thank you it was very interesting for me. Especially about the behavior of bees. I really never looked at bees from this perspective. I don't have free land now but I will think about it in 4 years.