# I need more deductions



## TxGypsy (Nov 23, 2006)

Any suggestions for good tax deductions? Anything farm related would be very helpful. I'd much rather spend money on the farm and be able to deduct it than to pay it in to the G. Something that is deductible year after year would be a big plus!

I'm currently looking for a new CPA and I'm hoping they can tell me how much I can reasonably deduct. I need a lot of dirt work done here and I'm hoping that is deductible, but it may not be until I am running my own cattle. Hard to justify spending lots of money on dirt work when my current farm enterprise is bee keeping.


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## Ramblin Wreck (Jun 10, 2005)

It's not an easy nor quick topic to cover TxMex. A lot of it boils down to your intent and the ability to prove to a possibly skeptical IRS agent your intent. If you are farming to create a self sufficient lifestyle, the government would view your operation as a "hobby farm", and severely restrict what you can deduct for income tax purposes. If you are trying to generate an income and working towards that goal, then you can deduct a great many costs incurred to get your operation going. I'd suggest starting with a business plan that identifies what you are trying to accomplish and the time frame for doing so. Also, you might want to review the two links below, one short and one long. The first one covers the business verses hobby question, and is short. The second is the IRS publication that covers the tax rules and accounting for a farm business...and please note that my very first sentence indicated it was not an easy nor quick topic to cover. Good luck.

http://www.irs.gov/uac/Business-or-Hobby?-Answer-Has-Implications-for-Deductions

http://www.irs.gov/publications/p225/


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## simi-steading (Sep 27, 2012)

Never mind.. I see Ramblin posted the link I had for you already..


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## jwal10 (Jun 5, 2010)

The government would love you to stimulate the economy, just be careful and not spend more than you can pay off. If you do it right, you will make more and need to spend more, every year, so you can deduct more. The government gets their share, either way One makes you feel better, both make you a servant of the government....James


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## Westwood (May 13, 2002)

Pre production expenses. Can't depreciate them until you have income.


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## TxGypsy (Nov 23, 2006)

So I would need to show a profit 3 out of 5 years. That is doable. It does not state how big of a profit it has to be. So, theoretically I could have quite a bit in the way of deductions and show a small profit and come out ahead. After reading that I now understand why millionaires buy race horses....only 2 out of 7 years for that endeavor for some reason. Thank you for the links Ramblin Wreck. 

Good point jwal. However if I don't do something I'm going to be paying in quite a bit. At least if I start up a cattle/bee/wildflower seed/etc. operation I am able to do improvements to my property and deduct them.


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## copperhead46 (Jan 25, 2008)

I have 7 to 10 head of cattle, and they give me lots of expences, feed, vet, fencing, pasture improvement, hay, farm supplies, farm equipment, repairs, farm truck, I get .53 cents a mile for farm related driving, (I take 150 miles a week for that), I have reg. cattle so I have dues and meetings and expenses related to travel and buying of animals. then, we build a new shed, or barn, or repair a roof. I have not made a profit in 7 years and don't intend to.


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## modineg44 (Jun 25, 2002)

You only save the tax rate times the expenditure. So if you spend $1000.00 on something you don't need & your tax rate is 25 percent, you lose $750.00. Spending money just for the tax deduction is a very bad idea.

Nancy


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## TxGypsy (Nov 23, 2006)

But if that $750 is going into improving my land or building the genetics of a herd it is not money lost. There are ways to get the good out of the loss. On paper it may look like a loss, but I'm betting that value wise I can at least break even and spend that money on stuff I'd do anyhow.


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## where I want to (Oct 28, 2008)

It's been a long time but I remember that farming did not need to produce a profit as often as non-farm business. I have seen farms not report a profit for decades. I don't remember whether there is even a presumption for farms.
The only thing the 3 in 5 years profit rule is about is the presumption IRS uses. If you have such a profit, no matter how small, 
IRS will actually have to prove you are not conducting a business. If you do not have a profit in those time frames, IRS may investigate to determine whether it is a hobby or not but that does not mean that you can't successfully prove the intent to profit anyway.


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## jjvon (Aug 4, 2013)

Consider an additional Home-Based Business. TWO incomes work. If you have the time and the right HBB is available (cheap) the Deductions are amazing. $5000 for start up equipment, inventory etc the another $5000 administrative...that s first year only and it assumes you are paying taxes (to take advantage of the TAX REBATES -- not credits). THEN there are the "other" deductions for the HBB. Really good reference book by Ron Mueller...Home Based Business Tax Saving Made easy. it is easy to read and understand. jjvon


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