5 Tax Deductions For Farmers

March 19, 2021

Since commercial farmers are business owners, they are entitled to a number of deductions at tax time. Whether you recently started a farm or switched from a hobby to commercial enterprise, learn what deductions your Los Angeles accounting service wants you to know about. 

Wages

Deduct the wages of both part- and full-time workers. Wages are expenses that can give you a significant tax break depending on the size of your operation and how many people worked for you throughout the year. Small business software allows you to keep track of your payroll easily. 

Farm Supplies

Hold on to receipts for all farm supplies, including animal feed, fertilizer, seeds, insect dusts and sprays, animal bedding and litter, and weed sprays. Every product connected to your farm is a tax write off. If your operation includes personal vegetable gardens, do not add those supplies to your deduction. Mixing personal and professional deductions can result in an IRS audit. 

Machinery & Truck Maintenance

Deduct the cost of maintaining all farming machinery, such as tractors, sluices, front-end loaders, backhoes, cultivators, and cultipackers. Your Encino tax consultants also emphasize truck maintenance deductions. If you replace any machinery or trucks throughout the year, you can deduct their costs as well. 

It’s additionally possible to deduct the gas spent to keep the trucks functional; however, you’ll need to use the IRS’s standard mileage rate to receive the deduction. 

Conservation

Utilize the IRC § 175 deduction if you’re a business farmer who engages in environmental conservation activities. Soil and water conservation, soil erosion prevention, and endangered species recovery all fall into this category. For example, if you construct one or several ponds on your farm to conserve water, you’ll enjoy the resulting tax deduction. The same is true for eliminating brush, installing wind breaks and drainage ditches, and protecting diversion channels. 

Livestock

Add the cost of livestock purchased for resale reasons to your tax deductions list, as well as anything else to do with the hulking animals. In addition to their feed, you can deduct the maintenance of their enclosures, tying materials, water containers, and milk assessments. 
For more help with farming tax deductions, contact Wallace & Associates, your accountant service in Los Angeles.