Tax Tips for Urban Farmers

Urban farms are becoming a bigger part of the Texas agriculture industry than they ever were. That’s because there’s more interest in healthy food in urban areas and these farms have an important role to play in food sustainability.

It’s important for these small businesses and their owners to be aware of the tax implications of their work. There are tax breaks and tax rules that are made to help farmers and that can apply to small urban farms. This can help a great deal when the venture is small.

Are you even a farmer?

 The first thing to figure out is are you actually a farmer from point of view of the IRS. That’s not always as easy to determine as it might seem. From the point of view of the government you are a farmer if you cultivate, operate or manage a farm for profit, either as an owner or a tenant.

This includes urban farms but only if they are making a profit out of their work. Farms that are so called community farms that are made to provide food for the community but don’t make money from it.

What’s farming income?

 Second step in knowing what you need to pay taxes on. This may seem since it’s called income tax, but it’s not always that easy to figure out what IRS considered to be income when you’re running an urban farm. For the most part that includes:

-Income made from selling livestock (but this doesn’t apply to most urban farmers)
-Income made from selling the produce of livestock (this can be done by the urban farmer as well)
-Distributions from cooperative
-Agricultural program payments
-Federal crop disaster payments
-Income received from custom hired
-Gasoline refund if you apply for any.

What expenses are not deductible?

There are some expenses that you need to make as a farmer and that can’t be deducted from your taxes. It’s important to be aware of these and to plan for them in order to pay them from your own income and not to rally on a refund. These are:

-Personal and living expenses for those living on a farm.
-Expenses for the produce you’re making for yourself and not for sale
-The value of raised animals that have died
-Losses in inventory
-Personal losses

Other tax breaks

 There are other tax breaks that apply to companies of all types and therefore for farms that are small businesses on their own. These include a few different tax breaks, different rules applying for each of them:

-Home office deduction, is a tax break you get if you work from home, without having to separate which of your home expenses are personal and which are about the business. This applies to farm home offices as well.

-Net operational loss is also deductible from your yearly taxes since that’s how the government helps the companies that have had a bad year. This is something that often happens to farms and you should be aware of it.

-Fuel credits are also deductible since fuel is one of the most important resources for a farmer. This is mostly done by purchasing fuel from the sellers that are allowed to get lower tax rates and using that fuel only for the purpose of farming.

Help with filling

The filling tax records is in itself an expense for a small business and there’s help with that that’s aimed towards farming and urban farming especially due to the importance of this fields of work for the community.

This help comes from the government and from the account agencies alike because these institutions offer both lessons and free accounting services for some clients at least. It’s important for a small and urban farmer to be aware that some of their accounting work needs to be outsourced for professionals due to how difficult and important that work is.

Being timely

 It’s essentially important t to be timely when it comes to your taxes. You should report your income on time and pay your taxes on time. This allow you to get tax breaks and to establish a good relationship with the IRS.

That sort of relationship will do you good in the long run, especially if your business ends up requiring some special treatment from the IRS. They will be more lenient towards those who have been on time before.

Conclusion

 Urban farmers are treated like any other small farm and their work is essential for those in the community who need access to fresh and healthy food. There are tax benefits made for farmers that you should be aware of and take advantage of.

It’s also useful to have professionals help you with this since they know more about the business than most farmers do.