Agriculture income tax update for farm familiesST. PAUL – There are many changes for tax years 2008 and 2009 resulting from passage of federal tax laws. Some Minnesota taxpayers may be required to file amended individual income tax returns since the 2008 Minnesota forms and instructions were printed before the state adopted the federal changes.
ST. PAUL – There are many changes for tax years 2008 and 2009 resulting from passage of federal tax laws. Some Minnesota taxpayers may be required to file amended individual income tax returns since the 2008 Minnesota forms and instructions were printed before the state adopted the federal changes.
Many changes are detailed, and more information is available in a new publication from University of Minnesota Extension titled “Ag Income Tax Update for Farm Families.” It’s available at www.cffm.umn.edu. Click on “publications.” Here are some highlights:
Economic stimulus payments received in 2008 must be reported on an individual’s income tax return, and the credit or allowable rebate will be recalculated. This is a critical, complicated issue so be sure to check with your tax preparer.
The 2009 legislation provides for a one-time payment of $250 to individuals on fixed incomes such as Social Security recipients, disabled veterans and retired government employees. Payments will reduce any “Making Work Pay Credit.”
Income averaging continues to be available for farmers only.
Capital gains rates for land and stock sales have changed.
The 2009 stimulus package brought changes in S Corporation built-in gains provisions. This is a very technical issue, so see your accountant for specific details for your situation.
Any crop insurance proceeds you receive need to be included as income on your tax return; you generally include that income in the year received. However, farmers can usually establish their practice of reporting crop income in a following taxable year by referring to their prior year’s sale records.
Farm family tax, retirement and education provisions have changed. Check the new publication for details.
Farming has been profitable in recent years. Many cash-basis tax filers used pre-paid expenses at year-end to balance expenses with income. This allows farm producers to guarantee delivery and lock in prices on crop inputs for the following year. However, there’s a limit as to how much a farm operator may pre-pay. Again, check the new tax update publication for details.
C. Robert Holcomb and Gary Hachfeld are agricultural business management educators with University of Minnesota Extension.