75% AGI From Farming is Good

Published on: 15:00PM May 24, 2019

The Market Facilitation Program enacted last year provided tariff relief for farmers.  However, there was a provision that indicated farmers could not receive relief if their average AGI was greater than $900,000.  

The disaster aid package that is expected to be signed by President Trump in the next week or so contains a change to this requirement.  It still has the $900,000 AGI requirement, however, if at least 75% of AGI is from farming, then the $900,000 requirement is waived.

This means that as long as at least 75% of your income (for an entity or individual) is from farming, then a MFP payment of up to $125,000 is allowed.  

I would guess that most farming entities will easily qualify for this new provision.  However, many individual farmers who have a larger amount of outside non-farm income may not qualify.  Here is an example:

Tom and Susan have a Schedule F farm that generates an average of $700,000 of income each year.  Susan has a job paying a wage of $300,000 and Tom has an interest in an ethanol plant that generates AGI of $400,000 each year.  Only 50% of their AGI is from farming, therefore, they would not qualify for any MFP payment. 

If they did not have the ethanol income, they may be able to qualify if Tom is the sole owner of the farmer since a calculation of AGI assuming a separately filed tax return would result in 100% of AGI from farming for Tom.

This change was actively pursued by Washington cherry farmers and will help other farmers in this same situation.