Several Tax Options Available for Farmers for 2008 Tax Season
December 1, 2008
With just a month before the end of the year, now is the time for farmers to be making tax preparations for 2008, says the Nebraska Farm Business Association director.
One big benefit for farmers in 2008 is that they can write off the first $250,000 in depreciation of assets that were bought in 2008, said Tina Barrett, director, Nebraska Farm Business Association. The Section 179 Expense Election allows farmer to write off purchases like tractors, combines and most farm equipment and breeding livestock.
"Some assets that don't qualify include machine sheds and purchases from related parties," Barrett said. In addition, the 2008 Economic Stimulus Package reinstates the bonus election.
Any brand new assets or breeding livestock not used in someone else's herd, counts for a 50Z% writeoff, she said. The bonus can be used with the 179 Expense Election, but the 179 election has to be used first.
"There are a number of producers that are going to have fairly high incomes this year," Barrett said. "Be sure to take full advantage of things like income averaging for farmers and make sure you're not leaving out any credits, exemptions or deductions and using that extra depreciation to bring income down."
In addition, zero capital gains that were written into law in 2002 are now available.
"Capital assets that are sold that would qualify for capital gains treatments would now qualify for zero percent if you are in the 10 to 15 percent tax bracket," she said. "This wouldn't help on a land sale because the gain would be big enough to throw you out of that tax bracket, but for breeding livestock sales, this is a really great planning tool."
Another law this year deals with Conservation Reserve Program payments.
"This has been debated for several years now, but the IRS finally came out with a clarification," she said.
Individuals receiving Social Security payments do not have to pay self employment taxes on their CRP ground. Those that still actively farm, but don't receive Social Security payments, will have to pay self employment taxes. It is undecided whether active producers, where the CRP ground is not part of their business, in another state or significantly far away from their practice, should have to pay self employment taxes.
"And, all families with a student attending college in Buffalo, Lancaster or Douglas counties have something to cheer about," she said.
A bill that came about after Hurricane Katrina allows education credits to be doubled in a county that has been declared a disaster area.
"This bill refers to where the students go to school, not where they are from," she said. In addition, besides doubling the credit on tuition and fees, it also includes room, board and books.
More information about this can be found at http://www.fema.org.
"If you have college students, this is important to take a look at," Barrett said.
Barrett suggests talking with a farm tax adviser before the end of the year to make sure you receive the advantages.
More information also can be found on UNL's "Market Journal" program at http://marketjournal.unl.edu/.
Sandi Alswager Karstens