Homestead and Small Farm Tax Deductions

If you manage a homestead or small farm this short article has some ideas for farm tax deductions you could claim.

| March/April 1973

  • tax return form - Fotolia
    Knowing what you're allowed to claim as farm tax deductions at your small farm or homestead can save you some pain when filling out tax forms.

  • tax return form - Fotolia

In my first-time-farmer dealings with the IRS last year, I learned a rather startling fact: Seasoned agriculturalists and new back-to-the-landers alike frequently pay more income tax than they should. There's a good chance that you're making the same mistake, too . . . so here's a few ideas that may legally save you some money when you "pay up" to Uncle Whiskers this year.

To claim deductions for a farm you have to be able to prove your intention to make a profit. No subsistence farmers allowed. But even if you make no money on your place, you can still claim deductions if it looks like you're trying to—or are getting ready to—make a profit. Repairs, maintenance of buildings and tools, cost of fertilizers and lime, land clearing, preparation for planting, erosion control: Money spent for any of these expenses may be deducted.

You may also depreciate (over a number of years) new buildings, equipment, and livestock. The portion of car or truck expenses attributable to farm work is depreciable.

If your agricultural operation is close to the subsistence level, it probably won't pay you to claim that the $50.00 worth of vegetables you sold last summer qualifies your undertaking for IRS tax filing as a business. But if you spent $400 on a plow, $200 on livestock, $500 on repairs to the barn roof and $60.00 on manure for the field . . . it might well pay you to claim your farm as a business so that you can take advantage of the deductions. The big professional farmers know all about this . . . and if you're just getting started and are operating on a small scale, there's no reason why you, too, should not deduct everything that is reasonable. Just don't try to claim your dogs as livestock!

OK. Suppose you work your place for two years with friends and then have to split for the city to earn some additional money. All of a sudden (after two years of floating free) you have heavy income taxes to deal with. One way to ease that burden is to do your splitting in June, so that the tax is divided between two years. If you do have to earn all your bread in one fiscal year, however, you can average the income over a five-year period.

Another situation: Having established residence at your farm, commune or country place, you leave to work at a job that you know is going to be temporary (because you're just doing it to get together a couple of mortgage payments). For a temporary* job away from home, all living expenses and all travel costs are completely deductible. That really helps take the sting out of those periods of exile. Food, rent, laundry, tolls, gas . . . take 'err all off !

Circle C Farms
11/15/2018 4:28:40 PM

We rescue dogs and Donkeys. We are called by Vets, Sheriffs and Courts to rescue or accept responsibility of care. We became a rescue farm, and many have found wonderful homes, but there are those that have disabilities that have stayed with us. We were informed that we can not claim expenses unless we have a profit ????

3/2/2018 9:40:22 PM

the wife and i just started a small farm where we raise chickens for personal use as well as sell eggs. we have a standing order for 11 dozen eggs a week. Can we claim the purchase of chickens, feed and building materials on our taxes?

3/2/2018 9:38:24 PM

the wife and I just started raising chickens for personal use as well as selling eggs. we have a standing order for 11 dozen eggs each week. since we just started and haven't been able to get a business license yet can we still claim the feed, building materials and purchase of chickens on our taxes?

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