![]() You don’t have to turn a profit every year. Ongoing losses aren’t typically something a business would accept, but a hobbyist would. Frequent small profits make it seem like you’re trying to minimize income. History of income and losses – Making a substantial sum is proof that you meant to do so. The IRS looks at several factors for proof of intent: In the past, many people used hobby farms and acreages as tax shelters. But you do need to show that your farm is intended to turn a profit. You don’t actually have to be profitable as a hobbyist before declaring your farm as a business. All that might not be completely necessary to run your small farm, but you have to be prepared to provide it all to the IRS when asked. You need to have a business plan, profit and loss statements, bank account, daily activity logs, and financial records showing your expenses and assets. To get the benefits of a being a business, you have to operate like one. You need much more than a collection of receipts and a spreadsheet of expenses. The burden is on you to prove to the IRS that your farm is a real business and no longer a hobby. You can’t simply start treating your hobby farm as a business. Steps for Establishing Your Farm Business Consult your state’s tax guide or a local tax professional to learn about the state-level deductions available to you. The rules vary at the state level too, depending on where you live - Tennessee, Alabama, or Mississippi - and what you produce on your farm. Read the IRS rules to see what applies to your farm. Each category has its own rules, restrictions, and limits. There are a number of farm business deductions. Cost of operating a truck or car for your farmĪnd that’s just the beginning.Real estate and property taxes on farm business assets like equipment, animals, land, and buildings.Repairs and maintenance on your property.Compensation to your children or spouse if they work the farm.Labor hired to help out with farm tasks. ![]()
0 Comments
Leave a Reply. |