What qualifies as a "farm" for tax deductables...?

[Wolf-Kim]

Just curious, does anyone know what qualifies as a farm?

A friend of mine started a small farm with 5 sheep and a couple of horses in his backyard, and it was registered as a farm and he was able to write all his "farm" expenses off. Can someone explain this to me?

Just a little confused and wondering if I'm missing out on a way to save money. Most people consider my place a farm, chickens, ducks, geese, quail, dogs, cats, horses... Just curious...

 

[2dream]

I have no clue but I will be very interested to see what response you get.

 

[PunkinPeep]

I am certain that this varies by location - probably by state. You can call your local tax office to find out the qualifications - possibly a little easier than trying to find the tax code yourself.

I think (if i'm remembering correctly) that here in Texas, you can get an agricultural tax cut if you have like 5 qualifying livestock animals. Sadly, and much to my chagrin, chickens are not "qualifying."

I will have to call and get better information on that. Hopefully goats count. We're hoping to get some fairly soon because our property really isn't big enough for cattle.

Again, i'm not sure if i have this information correct, so don't go by what i say. Call someone who actually knows.

 

[freemotion]

It is probably like most businesses, you have to show a profit after so many years. Is it three? Five? Not sure. But it will likely put you on a fast track to an audit. So keep all receipts!

That being said, having a home-based business can really off-set your tax liability from your regular job. A good book is Lower Your Taxes Bigtime by Sandy Bodkin. (Did I get that right?) We save oodles this way, but not as a farm. It is tough to show a profit with just a few animals.

 

[PunkinPeep]

In our area, i don't think the ag exemption has anything to do with profit. I think it's something meant to encourage agricultural development or to give a break to 'farmers' or something. I know that someone i know had an ag exemption at some point, and they simply got a cut because of having a certain number of a certain type of animals.

But we're not talking income tax here; we're talking property tax - through the county.

 

[Wolf-Kim]

I'm not exactly sure what it all meant. I was just curious what it was all about. I know that if you "register" your place as a farm at Agsupply or TSC then when you bought stuff for the farm, you would include it under the farm.

Eh, something like that. I know, silly to start a thread about it, I was just trying to figure what it was all about.

 

[PunkinPeep]

I should have said that I was not talking about income tax. Lord knows there is world of things that other people might be talking about while i'm just blowing smoke.

P.s. i don't think it's a silly thread. information is good for everybody.

 

[FarmerChick]

Profit needs to be seen on paper after 7 years. At least my accountant said that. If you don't show profit after that, you are "moved into a front row seat" for being audited by the IRS. So after 6 years I sold the farm on paper, and got out of declaring my animals, equip and income. It was a real pain to track all the farm stuff for the long run.

I just sell on the side now and don't declare anything anymore and WOW is it easier!

All receipts must be kept. If you want deductions, then you must show your profits etc. from sales.

You can not get deductions wtihout showing income.

Agri. property taxes are a pain in NC. For the few hundred dollars I save being zoned agricultural tax, I have to show years of farm income tax papers. Royal pain actually.

You truly need to talk with a tax accountant and find out all you have to do to get deductions.

 

[FarmerDenise]

Actually, I am glad you asked, I have been wondering if it would be a good idea to be a farm officially.
I keep wanting to check it out, but then I end up too busy doing farm chores. Or relaxing on line chatting to friends on a certain forum.

 

[xpc]

You have to check with your county, some are as little as 5 acres with most being around 10 acre minimum. Others need 50+ with the promise of not planting food for humans, deer feed and whatnot can be grown by permit only once in the program.