There has been a lot of changes when it comes to your taxes this year – How will you take advantage? These are some things you may want to consider as you schedule your 2020 farm tax planning meeting:
- Filing farm tax returns on or before April 15th is possible if you elect to make a tax deposit by January 15th
- This is a viable option when you have a number of tax documents that aren’t received until the last week of February (right before the normal March 1st filing deadline)
- If farming as a C-corporation, the land rent paid to you does not qualify for the 199A deduction but would if you elected to be an S-corporation
- Utilizing commodity wage to pay employees will save payroll taxes for you and the employee
- If you take the standard deduction, utilizing commodity gifts to your charities will provide a tax benefit, whereas, cash donations generally will not have any direct tax benefit
- If your spouse does not have a job off the farm and your farm income is such that you will qualify for the earned income tax credit, pay your spouse a commodity wage before the end of the year to maximize this credit
- If you are a sole proprietor and your spouse owns farmland, consider paying them land rent so as to save self-employment taxes
- If you recently retired from farming and sell your farmland within 2 years, the capital gain will not be subject to the net investment income tax
- If you have a contract to sell inventory right after the calendar year-end, and you need to capture income you can elect to take this contract into income in the previous tax year
- For minor children, it is more tax efficient to pay a commodity wage versus providing a commodity gift due to new kiddie tax rules
Be sure to meet with your tax preparer early so that you can ensure you are getting the max out of your taxes this year. As always, we encourage you to speak with one of our experts to discuss tax planning for your specific situation. We’re happy to help.
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