The following information is bonus material from Top Producer. It corresponds with the Moneywise department on pages 8-10 in the October 2008 issue.
Remember these farm bill changes that might affect you this year or in the near future: The Farm Bill contains at least 16 changes to the tax code--most, but not all, directly related to farmers and farming. Here are several of the most significant changes for farmers.
CCC Form 1099s. A 1099 must now be filed on all Commodity Credit Corporation (CCC) loans repaid after Jan. 1, 2007, regardless of how such loans are repaid.
Agricultural chemicals security credit. A taxpayer may receive a tax credit for expenses to keep agricultural chemicals secure, including risk assessments, employee training and security lighting around storage facilities. The credit equals 30% of such expenditures with limits of $100,000 per facility and $2 million per taxpayer per year.
Conservation easements. For 2008 and 2009, the value of donated conservation easements may be deducted as a charitable contribution up to 50% of adjusted gross income (100% of AGI for persons whose income comes mainly from agriculture) and excess deductions carried forward for up to 15 years. After 2009, donations will be limited to 30% of AGI and may be carried forward for 5 years.
CRP Payments to retired farmers. Conservation Reserve Program payments are no longer subject to the 15.3% self-employment tax if the taxpayer is also receiving Social Security retirement or disability benefits. This provision resolves a longstanding dispute between taxpayers and the IRS.
Limitation on excess farm losses. Farmers who receive farm program payments now cannot deduct more than $300,000 ($150,000 for married taxpayers filing separately) from non-farm income. Any losses that exceed the farmer's net farm income for the previous five years also are disallowed. For example, a farmer with $500,000 of net farm income over the previous five years, who then suffers an $800,000 farming loss, could deduct only $500,000 of the farming loss from non-farm income. This provision goes into effect in 2010.
Producers are well advised to discuss these and other tax law changes with their tax professionals.
–Allen H. Olson, agricultural lawyer with Moore, Clarke, DuVall and Rodgers, P.C. in Albany, Georgia.
For the IRS tax rules: www.irs.gov/publications/p225/index.html