Farm tax status question

[sethkuhl]

My wife and I own 24 acres in Western Montana. Looking to find more information on Farm tax. Any of you have your property under this plan. Wife wants to start a "hobby Farm". Is there any benefits or drawbacks that you all know about?

 

[VAspeedgoat]

By farm tax, what do you mean? Not familiar with that.

 

[Addicting]

...

 

[sethkuhl]

What are the requirements for turning a property into a farm for the purpose of changing taxes. is there a requirement for acreage? Number of animals? Must show profit?

My wife and I are looking at getting some equipment to improve our property, but looking into the farm route for the write offs seemed worth my time.

I might have to sit down with an accountant but was wondering if anyone on here has any experience with this.
(not sure if this cleared it up or not.)

 

[Straight Arrow]

On 24 acres?!

 

[ZBB]

I would either consult with a CPA, or go to a farmers market and try to find somebody that excepts credit cards and pic their brain a bit. With a quick google search the inter webs say you can only deduct up to what your “hobby” makes after that it’s a business. I’m married to a CPA, I’m a meathead I imagine when she talks to me about taxes and other bean counter stuff I have the same look she does when I talk about hunting or shooting. Good luck

 

[kenton]

Not sure what the "Farm Tax" is. Im not an expert but I believe a certain amount of your total income has to come from agricultural activities to get sales tax exemption.

 

[Big Fin]

What are the requirements for turning a property into a farm for the purpose of changing taxes. is there a requirement for acreage? Number of animals? Must show profit?

My wife and I are looking at getting some equipment to improve our property, but looking into the farm route for the write offs seemed worth my time.

I might have to sit down with an accountant but was wondering if anyone on here has any experience with this.
(not sure if this cleared it up or not.)

You talking about income taxes, State and Federal, or the generous County-bsed property tax reductions Montana provides qualified agricultural properties?

 

[MThuntr]

I've done some ag classification exemptions back in the day. It was potential production based on the soil survey capability. It's been awhile but I think the land needs to be capable of producing 35 AUMs of forage or equivalent in small grain production. 24 acres unless it's irrigated likely won't even come close but there may be some other options/alternatives for small acreage "farms".

 

[sethkuhl]

Fin thanks for the reply, just curious if it were your situation what would someone more knowledgeable than myself do.
sounds like a financial advisor/ CPa would be where we want to go???
It is in excellent elk calving grounds and third generation property. Fences need redone yearly and it feels like we are putting bandaids on bullet holes at the moment. Looking to improve those fences and get stock or possibly look into some other ag opportunity to offset expenses and equipment. Currently have horses in the fields that do a great job of finishing off the fences where the elk failed to break it down.
We have family neighbors that own 140 acres, just curious on any options really. Seems like there has to be someone in the group who has looked into something similar.

 

[sethkuhl]

I've done some ag classification exemptions back in the day. It was potential production based on the soil survey capability. It's been awhile but I think the land needs to be capable of producing 35 AUMs of forage or equivalent in small grain production. 24 acres unless it's irrigated likely won't even come close but there may be some other options/alternatives for small acreage "farms".

This was what I thought, what about doing bees, livestock, bison? Anyone try these or know about them?

 

[sethkuhl]

I am fine to hear from those of you in the know that my time is being wasted even thinking about it on 24 acres. Hunting season is coming, I should be shooting my bow anyway!

 

[dirtclod Az.]

Bison will tear down your fence faster than you can put them up.
Even cyclone fences.

 

[Southern Elk]

Sounds like you are wanting to start a farm. It’s basically like starting a business. An example would be buying cattle to start a farm. Those cattle are expenses. Any feed, fertilizers, equipment, ect would be expenses as well. The calves that you raise and sell would be income. Most small farms lose money, so it decreases your tax liability.

 

[Big Fin]

The county-level ag exemption for reduced property taxes requires a certain amount of revenue to be classified as ag property. Link here - https://leg.mt.gov/bills/mca/title_0150/chapter_0070/part_0020/section_0020/0150-0070-0020-0020.html

For income taxes, you need to have actual farm activity. That requires income, whether crop share, pasture lease, etc. If you don't have any income, just trying to deduct expenses you are incurring as part of property ownership will be a tough defense.

Seek a CPA who does farm work, explain in more detail what your situation is, and he/she should be able to give you some good advice.

 

[Brandon270]

I'm not sure what gives you the actual status to receive farm tax, it might be how how your official business is written up and how income is made off of your property like Big Fin said. Another benefit to the AG tax is sales tax is a different rate, that's not an issue in Montana, but when I buy parts and equipment for the dairy I work for here in California the sales tax drops from 7.5% to 2.25%. It doesn't apply at a place like Lowe's, but tractor shops, local hardware stores, hydraulic shops etc all give us the Ag tax rate. It also qualifies us to get off road diesel delivered, which is a huge difference in price with how high taxes are on fuel in California.

 

[NEWHunter]

On the local property tax level here in WI, tree farms qualify for the ag property tax rate. The differential between the two rates for may or may not be meaningful.

 

[BigHornRam]

Your use of the term "hobby" infers that you do not plan to make a profit on your "farm" and are looking to use that lack of profitability to offset other tax liabilities you might have. The IRS has complex rules regarding writing off losses. Contact a tax professional before you decide to go this route.

 

[sethkuhl]

thank you all for your help

 

[TwistedSage]

To claim any farm tax or exemption here you must be a producing farm, Producing meaning you are producing a product for the economy not just yourself.

Are you asking what you can write off on taxes or if you can be reevaluated as an ag property? In any case you may be required to show a farm plan or business plan.