Date of Disaster is Key

Published on: 08:39AM Aug 08, 2019

The Disaster Aid Bill passed in June contains aid to farmers who incurred crop and livestock losses related to natural disasters.  The key disasters listed in the Bill were:

  • Hurricanes that occurred last summer/fall that hit the Southeast with a lot of crop damage (and some livestock damage), and
  • Missouri River (and other rivers) flooding this spring that damaged crops that were stored in grain bins, etc.

There are certainly other disasters that occurred, however, these will likely be the highest pay-outs by the government.

The Income Tax Code allows "qualifying" farmers an election to defer crop insurance proceeds for one year after damage.  The key word is "damage".  Crop insurance proceeds can only be deferred one year after the damage occurs.

For example, any disaster aid proceeds (which will count as "crop" insurance) received related to hurricane damage incurred in 2018 cannot be deferred.  The damage occurred in 2018 and payment is received in 2019, therefore, you have already had an one year deferral.

However, disaster aid received this year for damage to crops that happened in 2019 can be deferred to 2020.  But the farmer needs to meet the qualifications of which the key one is that they normally report more than 50% of their sales in the year after harvest.

It is our understanding that most of these checks will start to go out this month.  Some of these proceeds can be deferred as income until 2020, but not all.