There are many tax laws that are specific to agriculture which allow the accelerated write-off of certain structures in one year as well as allow you to write off new crops such as citrus, grapes and dates at a very early stage.
There is a new tax law that that gives more flexibility for cash basis tax reporting. If you have a structure that is specifically used for product storage, this can be written off over 10 years or elect the accelerated method and write it all off in the first year. If you are planting a new crop such as dates, grapes or citrus, you can now take make a special election and write it all off in the first year.
There is also the law that allows you to take a deduction for prepaying certain farming costs. Creating a proper plan for future equipment exchanges is critical. In addition, part of the new law allows a 20% deduction on net income for tax calculations although there are numerous limitations. This can be very complicated like most tax laws, but well worth the cost of proper planning.
I grew up in the Imperial Valley and have been around farming all my life – from driving a tractor to applying the tax laws for agriculture right out of college. There are many laws that are specific to farming and you should have someone on your side that is very knowledgeable about them when your taxes or financials are prepared.
Lee M. Osborne, CPA, CFE, is the President of Osborne Rincon CPAs. During his 30+ years in public accounting, Lee has done extensive work in agriculture, retail sales, the service industry and manufacturing. Osborne Rincon is one of the oldest and most respected full-service accounting firms in the Coachella Valley. To learn more, call (760) 777-9805 or go to www.OsborneRincon.com