The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Crop Insurance is not Taxed Before Receipt!
Nov 26, 2013
We have gotten several calls and emails from readers and clients regarding when crop insurance is taxed. The confusion seems to relate to the revenue programs where the crop insurance received is based on price not yield. The confusion arises since these types of claims can not be deferred. However, if the crop insurance claim is received in 2014 for damage arising in 2013, the proceeds are taxed in 2014 when received. For cash basis farmers (which are almost all farmers), crop insurance proceeds are taxable when received (not necessarily the year of loss).
Now if you receive these proceeds in 2013, they will be taxable then. However, if you receive them next year, you have effectively deferred them for one year.
On a personal note, I am spending 10 days on vacation in San Jose del Cabo with my wife (somehow no kids are coming along, so this must be a true vacation). On the flight down yesterday, I noticed how much good ag land is not being farmed down here. I would think most of it relates to a lack of water, but if they could ever get water here, great crops would result.