This doesn't apply for this year, but my place is used to raise cattle and I have to maintain the land, pasture, fences and costs of electricity, diesel, etc. In general, is depreciation on a new tractor deductable and are the cost associated with operation also? I have never had an accountant, but if these are possible deductions, I will probably need one. Thanks in advance, MP
speaking of taxes
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npaden
Platinum Member
Generally speaking the answer to both of your questions is yes.
With that said, I understand this is a hot area for the IRS as a lot of Dr.'s and Lawyers are buying property out in the country and buying lots of toys to put on the property and deducting them with no true intention of ever generating a profit using the property.
As long as you intend to make money (as in have more revenue than expenses) you can deduct your equipment and operating expenses.
It's a pretty gray area though and there are a LOT of people who push the envelope. (I.E. deduct a $20,000 tractor when they are getting $1,000 of income off the property annually).
FWIW, Nathan
With that said, I understand this is a hot area for the IRS as a lot of Dr.'s and Lawyers are buying property out in the country and buying lots of toys to put on the property and deducting them with no true intention of ever generating a profit using the property.
As long as you intend to make money (as in have more revenue than expenses) you can deduct your equipment and operating expenses.
It's a pretty gray area though and there are a LOT of people who push the envelope. (I.E. deduct a $20,000 tractor when they are getting $1,000 of income off the property annually).
FWIW, Nathan
rpeter
Silver Member
As a farmer you do have to show the intent of making a profit. However, you do not have to depreciate your tractor. In any year you can expense up to $100,000 worth of equipment that normally you would have to depreciate. It is a sec.179 deduction.
rambler
Veteran Member
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If you are doing this for a profit, & will likely show a profit over expenses 2 out of 5 years, then yes. There are many options of how to deduct your costs. Basically there is short term (supplies), mid-term (the tractor & other large purchases), and long term (land, fence, and other 20 year plus investments).
You can play some with your mid-term expenses, apply them more to the years you will make more money, etc.
It does take a good accountant to get full benifit of all this. But, you do need to really make a profit from time to time, or have no other job at all - or you will be an audit flag. If you deduct a new $20,000 tractor over 10 years, that is $2000 'lost' every year..... Be sure you can get a profit over that & your other expenses.
--->Paul
You can play some with your mid-term expenses, apply them more to the years you will make more money, etc.
It does take a good accountant to get full benifit of all this. But, you do need to really make a profit from time to time, or have no other job at all - or you will be an audit flag. If you deduct a new $20,000 tractor over 10 years, that is $2000 'lost' every year..... Be sure you can get a profit over that & your other expenses.
--->Paul
wushaw
Elite Member
If you have your land in AG exemption then yes you should be able to depreciate your equipment expenses.
Mine is in wildlife exemption and I can do the same as AG.
I don't know about the profit making thing..I know I will never make a profit.
Mine is in wildlife exemption and I can do the same as AG.
I don't know about the profit making thing..I know I will never make a profit.
There are a whole lot of rubbish comments in this particular chain of postings.
I'm not going to try to set each of you straight in this forum, but I will tell you that you really should get an experienced farm or personal property accountant. From direct personal experience, they are inexpensive and will save you a pile of money.
There are a lot of truly useful posts on this subject in the forums, you should do a search on 'tax' when you're ready to read.
I'm not going to try to set each of you straight in this forum, but I will tell you that you really should get an experienced farm or personal property accountant. From direct personal experience, they are inexpensive and will save you a pile of money.
There are a lot of truly useful posts on this subject in the forums, you should do a search on 'tax' when you're ready to read.
daTeacha
Veteran Member
I don't know about rubbish in the thread, but I do know the tax laws are incredibly complex and you need to spend a whole lot of time reading carefully or hire someone who knows and works with them.
Example -- a few years ago I had some trees cut to thin my woods. A first run through the tax form had me thinking I was going to be looking at a $15000 increase in my declared income for the year. Looking again and again and again and again and ....well you get the idea. Eventually I came across a section of the code that enabled me to declare a $1500 l
LOSS on the sale! It seems that if you sell the trees on the stump they are a crop but if you hire someone to drop them, limb them out, and drag the logs into a field then the trees are personal property to be sold like a used car and can be as depreciation against the value of your land. All the costs incurred in preparing them for sale are deductible from the sale price, too. It's more complicated than that, but don't do it if you sell trees every few years. I think I spent about 30 or 40 hours reading tax codes on line to figure it all out and carefully documented everything just in case. As a final step, I had my future wife's farm tax guy look it over and pronounce it kosher.
Definitely consider hiring a tax person who is familiar with the situation you are in. Don't just go down to Sears or H&R Block or use a program from Staples. You can end up in serious trouble with people who don't forget from one year to the next, or you can cost yourself a lot in overpayments.
Example -- a few years ago I had some trees cut to thin my woods. A first run through the tax form had me thinking I was going to be looking at a $15000 increase in my declared income for the year. Looking again and again and again and again and ....well you get the idea. Eventually I came across a section of the code that enabled me to declare a $1500 l
LOSS on the sale! It seems that if you sell the trees on the stump they are a crop but if you hire someone to drop them, limb them out, and drag the logs into a field then the trees are personal property to be sold like a used car and can be as depreciation against the value of your land. All the costs incurred in preparing them for sale are deductible from the sale price, too. It's more complicated than that, but don't do it if you sell trees every few years. I think I spent about 30 or 40 hours reading tax codes on line to figure it all out and carefully documented everything just in case. As a final step, I had my future wife's farm tax guy look it over and pronounce it kosher.
Definitely consider hiring a tax person who is familiar with the situation you are in. Don't just go down to Sears or H&R Block or use a program from Staples. You can end up in serious trouble with people who don't forget from one year to the next, or you can cost yourself a lot in overpayments.
