Recently, I have been helping out with the OSU Income Tax Schools. Each year, OSU Extension offers eight two-day workshops across, Ohio to update tax professionals about the latest changes to the IRS tax codes. As we begin the month of December, it is great time for farmers to start to analyze their 2014 farm records.
This year has been a relatively good income year for dairy farmers, and even though corn and soybean prices have taken a nose dive this fall, crop farmers may still have relatively high income levels from sales of their 2013 crop during 2014.
Larry Gearhardt, OSU Tax Specialist suggests now is the time for farmers to determine, as close as possible, what their income and expenses are for the year. This leaves ample time for them to take action to reduce income taxes, if possible. As soon as the ball drops on New Year’s Eve, the farmer has lost his opportunity to take action to reduce his taxes in 2014.
The most basic year-end tax planning is timing income and expenses, if possible, so that they occur in the year that is most beneficial to the farmer. If 2014 is a high income year, the farmer should delay the receipt of revenue until 2015 and make some purchases for 2015 expenses this year.
Maybe now is a good time to pay for the fertilizer and seed for next year’s crop.
In a meeting last week, Mr. Gearhardt reported there are 55 tax benefits, credits, and exclusions that expired at the end of 2013 and have not been re-authorized. The two most critical tax benefits for farmers that either expired, or were reduced, were bonus depreciation and the Section 179 deduction. Until the end of 2013, Section 179 of the Internal Revenue Code allowed any business owner to deduct up to $500,000 of the cost of any new or used piece of equipment an expense in the year of purchase instead of putting it on a depreciation schedule. This amount has been reduced to $25,000 in 2014.
In addition to Section 179 deduction, a farmer could take 50 percent bonus depreciation in the year of purchase of any new capital asset. There is no bonus depreciation for 2014.
I have had quite a few farmers ask me to look in the crystal ball on whether or not the Section 179 expense deduction will be increased and the bonus depreciation returned. The word out of Washington is that nothing will happen until very late this year.
A bill which has passed the House of Representatives is still awaiting a decision from the Senate. This bill would set the Section 179 limit at a permanent level of $500,000 and extended the 50 percent bonus depreciation, all retroactive to this year.
But your guess is as good as mine on if this will actually happen.
Speaking of taxes, local tax practitioners with an interest in farm income taxes will have an opportunity to attend a one day farm tax webinar workshop on Dec. 15 from 8:30 a.m. to 3:00 p.m. at the Ashtabula County Extension office in Jefferson.
This workshop will be taught via webinar by Dr. Phil Harris, professor of agricultural economics at the University of Wisconsin.
The program has been designed for tax practitioners who have a significant number of farm clients and therefore need a substantial amount of information on agricultural tax issues.
Participants can view a live webinar and will also be able to have their individual questions answered during the program. Registrants will also receive a valuable agricultural taxation update book.
This program has been accepted for continuing education credits by the Accountancy Board of Ohio, Supreme Court, and the IRS Office of Professional Responsibility. The registration fee is $125 per person and includes continuing education credits, lunch, refreshments and the agricultural tax manual. Complete workshop information and online registration is available at the OSU Income Tax Schools’ website at www.aglaw.osu.edu/osu-income-tax-schools, or by calling the OSU Income Tax School program at 614-292-2433.
To close today’s column, I would like to share a quote I got a chuckle from an unknown author who stated “Did you ever notice that when you put the words “The” and “IRS” together, it spells “Theirs?”
Have a good and safe day.
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