Tax Planning is a Must for Farmers as a Result of New Legislation

Changes to the U.S. tax code as a result of the 2017 Tax Cuts and Jobs Act (TCJA) will have a big impact on how farmers treat losses. In a recent article for The Progressive Farmer, author Rod Mauszycki details what has changed.

Prior to the TCJA, the treatment of farm losses was governed by older tax laws, including the 2014 Farm Bill. The TCJA eliminated the former old excess farm loss rule, making losses subject to “excess business loss” limitations. Rather than claiming losses on Schedule F (Form 1040), farmers must now carry them forward as part of their net operating loss (NOL). As such, farm losses no longer offset self-employment income. Additional limits to the treatment of NOLs include an 80% offset limitation and a $250,000 ($500,000 for married filing jointly) cap.

Mauszycki recommends a number of strategies for dealing with farm losses in light of the new tax regulations. His chief suggestion is that farmers keep their NOLs to a minimum—or avoid creating them at all, if possible. He also recommends avoiding prepaying expenses, carefully planning the timing of big purchases, and capitalizing certain costs.

For more details, read the article in full at The Progressive Farmer. Contact a De Boer, Baumann & Company ag professional with questions about your specific situation.