Farming Strategies

I ran across these articles that I thought might be helpful to share:

Farming can significantly reduce your taxable income.

http://smallbusiness.chron.com/use-small-farm-tax-write-offs-15880.html

Most states have tax incentives for farmers and ranchers.

http://smallbusiness.chron.com/farm-tax-exempt-number-66403.html

Anyone else have some strategies to share?

The one that has been most significant for us was qualifying for agricultural tax status on our land.  In Texas, and perhaps in some other states, once you qualify for agricultural status, which may cut property taxes by half or more, you can apply for Wildlife Management status, which has the same benefits but doesn't require one to farm the entirety of the land, or any of it, if one chooses.  http://tpwd.texas.gov/landwater/land/private/agricultural_land/

Tyler, that is a great link.  We do Wildlife Management but that would have been helpful when we had our farm.

When we were younger we bought our farm which had Ag tax status.  When I went to the Tax Office I was told I had to provide my IRS tax forms showing we were farming.  We didn't have such a thing as were doing homesteading for ourselves and I explained that to them..  We gave away produce, let people cut hay off our property, had chickens, cows, a pig and goats.  This was before we had internet to tell us what we could do.

Here is another link I found helpful but is also Texas specific.

https://www.comptroller.texas.gov/taxes/publications/94-101.pdf

Sales of some agricultural items are never taxable, regardless of who is buying the item or how it will be used. The following agricultural items are not taxable and an exemption certificate is not required.

Seeds and annual plants, the products of which are commonly recognized as food for humans or animals, or are usually only raised to be sold in the regular course of business, such as corn, oats, soybeans, and cotton seed;

Animals, including cattle, sheep, poultry and swine, the products of which are ordinarily food;

Horses and mules;

Water;

Feed for farm and ranch animals or wild game, including oats, hay, chicken scratch, wild bird seed and deer corn. The exemption does not apply to feed for pets and exotic animals, even if those animals are located on a farm or ranch.

I use a schedule F, and run a small CSA. I work full-time, using the csa utilized deduction cuts my income in half. We only have 4 member shares and about 1/4 acre of crop but we sell 2000$-4000$ a year, but cost are about that good years we may have less coming back but bad years we sent hurting and the csa pays for all of my hobby. Working well for us see your tax preparer each situation is different.

Thank you

Here it is a two step process. You go through the local FSA office and the local committee determines if you are a farm or not. With that determination a lot is possible. It REALLY helped in my divorce.

Then there is a Schedule F for the IRS. A lot of people think this is to prove you pay taxes and for the IRS to know your business, but this is not it at all. The USDA does not care if you make a profit, in fact farming is the only business that does not have a 5 year stipulation, that is, if your business does not make a profit in once in 5 years, the IRS determines it is not a legitimate business and its defunct. In farming that cannot happen...we buy everything at retail prices and sell at wholesale prices...what kind of business model is that? Really what the Schedule F form provides to the USDA is that you are putting food on the National Food Chain. That is what the USDA was created for.

I have no issue with those that provide for themselves, and it should happen more, but the role of the USDA is to help feed the nation as a whole, and the Schedule F...whether showing a profit or not...determines if food is being kept, or put on the national food chain.

Still this is a catch 22. For me, a full-time farmer, if I show a profit, I must pay 35% taxes on that profit. However being a farmer I can deduct almost anything and show a loss. It would always be great to show a loss and not have to pay taxes, but inevitably something comes up and you need a loan for this or that. You have to prove that you can pay that money back, and without a little black in the profit column once and awhile, it is difficult to do. It is a vast change from when I worked in the shipyard. There I had a lucrative income every week and bankers loved me. No debt, good credit and a steady income. Now, without a steady income every week, it has been tough to get a few things I really need.

Fund Your Land: Wildlife Habitat Conservation and the WHIP Program

http://www.grit.com/departments/wildlife-habitat-conservation

In 2014, Congress merged WHIP with the Environmental Quality Incentives Program (EQIP), mandating that 5 percent of EQIP funds be used for wildlife habitat related projects.

https://conservation.ewg.org/about_whip.php

https://conservation.ewg.org/about_eqip.php

Most commonly used practices for EQIP contracts in the United States

https://conservation.ewg.org/eqip.php?fips=00000®ionname=theUnitedStates#mostcommonpractice

U.S. Department of Agriculture’s Natural Resources Conservation Service,

https://www.nrcs.usda.gov/wps/portal/nrcs/site/national/home/

** How to Get Started with NRCS  **

https://www.nrcs.usda.gov/wps/portal/nrcs/detailfull/national/newsroom/features/?cid=stelprdb1193811

** How EQIP Works  **

https://www.nrcs.usda.gov/wps/portal/nrcs/detailfull/national/programs/financial/eqip/?cid=stelprdb1044009

Anne Miller wrote:Fund Your Land: Wildlife Habitat Conservation and the WHIP Program

http://www.grit.com/departments/wildlife-habitat-conservation

In 2014, Congress merged WHIP with the Environmental Quality Incentives Program (EQIP), mandating that 5 percent of EQIP funds be used for wildlife habitat related projects.

https://conservation.ewg.org/about_whip.php

https://conservation.ewg.org/about_eqip.php

Most commonly used practices for EQIP contracts in the United States

https://conservation.ewg.org/eqip.php?fips=00000®ionname=theUnitedStates#mostcommonpractice

U.S. Department of Agriculture’s Natural Resources Conservation Service,

https://www.nrcs.usda.gov/wps/portal/nrcs/site/national/home/

** How to Get Started with NRCS  **

https://www.nrcs.usda.gov/wps/portal/nrcs/detailfull/national/newsroom/features/?cid=stelprdb1193811

** How EQIP Works  **

https://www.nrcs.usda.gov/wps/portal/nrcs/detailfull/national/programs/financial/eqip/?cid=stelprdb1044009

Some of my current and past restoration projects have been funded using EQUIP. The program is a reimbursement based one - you do the work and then get paid so you have to have the funds upfront. The non-profit I work for has been able to make this work. The one thing that has been annoying for us is that the NRCS has very specific requirements for how you do the work and they will inspect your work before they reimburse you. For restoration planting work (they fund a range of different projects including tree thinning, invasive plant removal, etc.) they require a 2x2 foot square of mulch, 3 inches deep around each plant, plus a plant protector that is fully touching the soil. Spacing of the plants needs to be on more than 8feet apart. And they will send someone to measure your work to make sure it complies.

The problem is that it is not always practical to do all that at every site. We have had sites where our access is very difficult and getting enough mulch in is very hard or we simply don't have enough labor to do it all. But depending on your site it could work out great. Mainly just wanted you all to know how it works. I have been frustrated because using EQUIP has limited my ability to customize my restoration design to the needs of my specific site. It is a one size fits all program that does not always fit with reality. But that being said we have successfully used it to restore 50+ acres. I'm currently working on new designs that will hopefully meet NRCS rules while being easier to implement - but I will need to talk to the person from the NRCS who inspects our work to see if he would sign off on it...