I have some land that is not being used and was thinking about setting it up for a farm tax deduction. I've talked to several people and they said that all you have to do is show a profit every five years. Is there a minimum acreage or number of livestock to qualify. I was thinking I could fence off about 5 acres and throw some goats and sheep in it and maybe get some write offs. Any suggestions?

 

Heck, you aint even got to have a farm for a farm tax deduction. The federal Gov. got my 1099 messed up and still swears I own a farm. I dont even own a 1/4 acre and still cant get it through to them. They said they didnt care either way, I just had to have a name for it so I named it and they are happy and I am happy.

 

I have been looking into doing this. I am a single guy with a decent job so taxes are not very good to me. Luckily i own a house on 3 acres so i have property taxes and interest for deductions. I was planning on making my hobby (horse breeding / weanling & yearling raising) into a business to help on taxes. I am just not sure the best route to go. I could probably show a profit 5yrs down the road. Unfortunately, i have my mare leased to a close frient this year so she isnt even on my books; no profit for me, she is just off my feed bill.

Depending on where you are, you may be able to have an ag exemption which could save you on property taxes.

 

Well this is what I was thinking. I could get a couple of goats and sheep cause you really don't have to mess with them. I could write off my dog food, cat food, and whatever else. I could pay my boys @ $200 per month contract labor then cash the check and buy groceries, clothes and then give them about $25 each allowance. I also would write off my interest on my tractor and the Rhino I really want and maybe a tank of diesel once a month. I don't feel guilty about this one bit since the government doesn't feel guilty about screwing me every chance they get.

PS.... if the IRS reads this, I'm just kidding.

 

I'd like to find out about this too-Hopefully in a few years I'll be buying a house and I'd like to see if I couldn't get an acre or three to go along with it. Would the folks at H&R Block know anything about it?

 

If I remember right, you have five years (or was it three?) to SHOW a profit. If you don't show a profit within the given time, you loose the deduction.

 

According to a tax guy he said that you really don't have to show a profit, just show an attempt to make a profit. Even if you wanted to show a small profit ($50) it wouldn't be that hard. Just don't itemize your 5th year. I'm no expert yet but I'm going to be before next tax season.

Oh yeah, he said do it at your own risk.

 

I believe that two head of cattle will satisfy the requirements for a hobby farm to allow you to get the tax deduction. A neighbor just purchased a place we had been leasing to run cattle. His CPA told him that if he ran two head of cattle on the place, he could get the deductions.

 

DANGER WILL ROBINSON DANGER!!!!!

Guys, the IRS has been "on to " hobby farming as a tax shelter for a few years or more... there is an entire IRS audit guide devoted entirely to hobby farms. " The IRS Guide to Auditing Small Farm and Ranches"... I dont have the govt. pub number in front of me. If you want it Pm me and I'll find it for you, I have a copy of the pub
IF you want to claim farm expenses you will need:
1) a written bussiness plan, and it better be proffesionaly prepared and you had better be following it if audited.
2) show that EVERY purchase you make and everything you do is aimed at turning a viable profit.
3) Show that you are actively involved in the operation as a bussiness...
4) show that you have sufficent knowledge of the operation ( i.e. you know the cattle market and how to raise cattle for a profit) to realisticly expect to be able to make a profit. ( do you know wat breeds are best for what you are doing? what bloodlines and breeding ? how do you determine feed vs. growth ratios?)

Cattle operations are given a 5 year window to turn a profit, horse operations are given 7 years.

I have been through an IRS bussiness audit on my horse operation, and survived alright, but it is a very intimidating ordeal.
If you are in your 4th year of operation, and get auditted, and the IRS disallows the bussiness, you will owe taxes and penaltys on all years of the bussiness's operation....
If they determine that the sole motivator for the bussiness was a tax shelter, they can file tax fraud charges...
All in all it can be a real head-ache. There are a lot of ways of legaly and legitematly runnig a small farm and taking the tax advantages offered, but just make sure you dot all your "i"s and cross all your "t"s, or it can come back and realy bite you...
I am not saying dont do it, but be aware there is ALOT more involved than just throwing some livestock out on your pasture...
do it right.......

 

I stopped fooling with the IRS, but still keep enough stock on the place to get my Ag deferal on my county taxes. This alone saves several hundred $$ a year.

 

Where does someone find out about all these tax breaks and AG deferrals ?? I think I was absent that day in VO-AG.


I'm thinkin Hamilton is on a similar path as I am.

PISTOL

 

Your county tax office can answer all your questions. Might not want to tell them who you are though...