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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.
Based on this year's drought, we know that this will most likely be the largest amount of crop insurance claims ever processed. With proper planning, you may be able to structure when to report these crop insurance proceeds to achieve the best tax advantage for this year.
Crop insurance proceeds due to crop damage (not price drops) are taxable in the year of receipt. However, the tax laws do allow a farmer to make a deferral until the next year assuming that the farmer meets the following:
The election to defer is made on the tax return.
If you are a farmer that normally sells all of his crop in the year of harvest, you still may be able to "defer" by working with your crop insurance agent and company to not make the claim until late in the year and receive your check after year-end, otherwise you will need to report in 2012.
We have worked up a Crop Insurance Matrix that can step you through the process.
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