In my last column, I noted some interesting tax considerations that apply to ag operations filing as sole proprietorships. Let’s talk about how certain differences from traditional small businesses can mean a tax break for the farmer, grower, or rancher.[emember_protected custom_msg=”Click here and register now to read the rest of the article!”]
If the sole proprietor of an ag operation enjoys an increased income one year over the previous one, then he can elect to calculate his tax using “income averaging.” Basically, what this means is that the last three years of low income can be considered to reduce the effects of the current year’s tax bill. Until a new tax code was signed in 1986, this rule applied to all small businesses. But since then, it applies to ag operations only.
With all of the considerations of farming, some income can be declared the following year instead of the current one. Basically, what this means is if weather or other circumstances outside of your control force you to sell more of your livestock or crop than you normally would in the current year, you may be able to hold off reporting the gain from the additional herd or crop sold until the following tax year.
If you’re not sure whether these tax breaks will apply to you for the current year, then I encourage you to seek out an agriculture accounting expert.
column by STEVEN E. CRISMAN
BIO: Steven Crisman is the managing partner of Cross, Fernandez & Riley, LLP’s (C/F/R) Winter Haven office and leads their Agriculture Practice Group. He primarily serves the agriculture, manufacturing, warehousing, and distribution industries. He has specific experience with citrus growers, cattle ranchers, citrus and other horticultural nurseries, citrus harvesters and other support industries as well as watermelon, blueberry and other growers. In addition, Steve provides comprehensive tax and estate planning, attestation and business succession planning services.