Ag Producers Should Do Year-end Income Tax Planning

Ag Producers Should Do Year-end Income Tax Planning

December 16, 2021 Farm News News -- KRJB-KRJM-KKCQ 0

Fargo, ND — Agricultural producers should be focused on year-end tax planning this time of year to avoid any sort of surprises when it comes to income taxes. NDSU Extension Farm Management Specialist Ron Haugen says farm owners should try to keep their income and expenses as level as possible and make adjustments now while they still have the ability to do so.

This summer’s drought had an impact on livestock and crops, and it could potentially have an impact, positive or negative, on your taxes as well, according to Haugen.

Other tax planning items to note:

* Prepay farm expenses. Feed, fertilizer, seed and similar expenses can be prepaid. Typically, discounts are received by paying for these expenses in the fall. Producers can deduct prepaid expenses that do not exceed 50% of their other deductible farm expenses.

* Defer income to 2022. Crop and livestock sales can be deferred until the next year by using a deferred payment contract. Most grain elevators or livestock sale barns will defer sales until the next tax year. Producers should be aware that they are at risk if the business becomes insolvent before the check is received and cashed.

* Purchase machinery or equipment. Machinery or equipment purchases can be made before the end of the year to get a depreciation or 179 expense deduction in 2021.

* Contribute to a retirement plan such as a simplified employee pension plan, savings incentive match plan for employees or individual retirement account.

Information on agricultural topics can be found in the Farmers Tax Guide, Publication 225. It can be obtained at any IRS office, ordered by calling 800-829-3676 or found online at https://www.irs.gov.

Additional questions on this topic should be addressed to your tax professional or the IRS at 800-829-1040 or https://www.irs.gov. North Dakota income tax questions can be addressed to the North Dakota Tax Department at 877-328-7088 or https://www.nd.gov/tax.