By: Robert Moore, OSU Extension
Gifting can be an important part of a farm transition plan but it is important to understand the tax implications of gifting. Taxable gifts refer to the total value of gifts given to others during a calendar year, which may be subject to gift tax under the U.S. tax code. These gifts can include various types of property, money, or assets. The determination of taxable gifts considers the fair market value of the transferred assets and any applicable exclusions or deductions provided by the tax code. Currently, an individual may gift up to $17,000 each year to an unlimited number of people. These annual exclusion gifts are not subject to gift tax. Gifts made in excess of $17,000 are either subject to gift tax or reduce the lifetime gift exclusion by the amount of the excess gift. For a detailed discussion of gifting, see the Gifting Assets Prior to Death bulletin at farmoffice.osu.edu.
In addition to direct gifts, the payment of a bill or expense on behalf of someone else is usually considered a gift. However, there are two specific exceptions. The IRS allows education expenses and medical expenses to be paid for someone without being considered a gift. These exemptions may present opportunities for those who are limited by the $17,000 annual gift limit.
Paying tuition directly to a school is not considered a taxable gift. There are two important points to remember regarding tuition payment. The tuition must be paid directly to the institution, the payment cannot go directly to the student. Second, the exclusion applies only to tuition payments. Other school-related expenses like books, supplies, and room and board costs are not eligible for this exclusion.
Consider the following example:
Dale has a grandchild who attends Harvard. The tuition at Harvard is very expensive and Dale would like to help his grandchild. Dale sends a check to Harvard for $50,000 to be applied to tuition. The $50,000 that Dale paid for his grandchild’s tuition is not considered a gift and therefore does not count toward the $17,000 annual exclusion gift. Dale could still gift up to $17,000 directly to the grandchild and still not exceed the annual gift exclusion.
Payments that qualify for the medical exclusion are those made directly to a healthcare provider, medical institution, or medical insurance company for someone’s benefit. Transportation and lodging costs related to the person’s medical care can also be covered, but there are specific rules, so it is best to consult with a tax professional. The payments must go directly to the care provider or insurance company, not to the individual receiving care, to avoid it being considered a taxable gift above the annual exclusion amount.
Consider the following example:
Waylon and his neighbor Tom are lifelong friends. Tom is at Waylon’s house for dinner when he begins to have extreme stomach pain and nausea. Waylon calls 911 and an ambulance takes Tom to the hospital. Once at the hospital, Tom is rushed into surgery to have his appendix removed. A few weeks later, Tom receives a bill from the hospital for $25,000. Waylon knows Tom has been down on his luck financially and he does not want Tom stressed about the cost of the life-saving surgery. Waylon pays the full $25,000 directly to the hospital for Tom’s surgery. Additionally, Waylon gifted Tom $10,000 to help cover his lost wages while he recovered. By using a combination of the medical expense exemption and the annual gift exclusion, Waylon was able to help out Tom with $35,000 without having to pay gift taxes or adversely affecting the lifetime gift exemption.
Estate Planning Implications
Farmers who may wish to transfer wealth to others during their life should keep in mind the annual gift exclusion and the education and medical payment exclusion. These strategies allow money or other assets to be transferred without negative gift or estate tax implications. Using these exclusions can help farmers plan their estates by passing on assets, supporting education, and managing healthcare expenses with fewer tax issues.
Learning to manage your small farm like a small business can help you to be more profitable! Sign up today to take the Delaware, Knox and Morrow Small Farm Management College.
It’s time to think about making maple syrup!
Are you someone with a few maple trees and you want to make your own syrup? This class is for you.
Backyard Maple Production will be held Jan. 29th at the Event Center on the Warren County fairgrounds. We will approach this class from the perspective of just a few trees on your property that you want to try to produce some syrup. We will also have the opportunity for you to purchase a few buckets or bags with spiles and other pieces of equipment if you catch the fever and want to go home and get started. There may even be a few maple treats to get your mind thinking about possibilities.
Registration is open here. We hope to see you there!
– Glen Arnold, CCA, Field Specialist, Manure Nutrient Management
Most producers have had the needed dry weather this fall to get livestock manure applied to fields. However, a wetter than normal corn crop and full elevators, did delay corn harvest longer than normal in some areas. For livestock producers waiting on frozen ground to apply manure, here are some things to keep in mind. Frozen ground would be soil that you cannot inject the manure into or cannot conduct tillage within 24 hours to incorporate the manure.
Permitted farms are not allowed to apply manure in the winter unless it is an extreme emergency, and then movement to other suitable storage is usually the selected alternative. Several commercial manure applicators have established manure storage ponds in recent years to help address this issue.
Now that harvest is finally winding down, our thoughts change to fall weed control. This is the best time of year to control winter annuals and some of the more difficult to manage overwintering weed species. Biennial and perennial plants are now sending nutrients down to the root systems in preparation for winter. Systemic herbicides like glyphosate and 2,4-D applied at this time will be translocated down into the roots more effectively than if applied in spring when nutrients are moving upward. This results in better control. In addition, the increasingly unpredictable spring weather patterns we have experienced in recent years can influence the timing and efficacy of spring burndown applications. Fall-applied herbicides can lead to weed free situations going into spring until early emerging annuals begin to appear in April, and are an essential component in the control of marestail and other overwintering species.
Here are some reminders when it comes to fall-applied herbicides:
- Evaluate weed emergence and growth post-harvest to help determine if an application is necessary.
- Fall-applied herbicides should primarily target weeds that are emerged at the time of application.
- Species present in large quantities late-season that would necessitate the application of an herbicide include (but are not limited to): marestail, dandelion, wild carrot, poison hemlock, common chickweed, purple deadnettle, henbit, annual bluegrass, and cressleaf groundsel.
- OSU research has not found much of a benefit from adding metribuzin or other residual products late in the fall. The exception to this is chlorimuron, which can persist into the spring. The recommendation here has generally been to keep costs low in the fall and save those products for spring when you will get more bang for your buck.
- Herbicides generally work across a range of conditions, though activity can be slower as temperatures drop. Foliar products are most effective when daytime temperatures are in the 50s or higher and nighttime temperatures remain above 40.
Table 1 in the Weed Control Guide for Ohio, Indiana, Illinois, and Missouri provides ratings for various overwintering weed species in response to fall-applied herbicides.
Source: Peggy Hall, OSU Extension
With the warm, dry, and windy months of October and November behind us, Ohio farmers will soon have legal clearance to conduct open burning during the daylight hours. Ohio law prohibits all open burning from 6 a.m. to 6 p.m. during October and November. That’s because ground cover and weather conditions create high fire risk and volunteer firefighters with daytime jobs aren’t readily available to fight the fires.
December 1 marks the end of the daytime burn restriction, but other open burning laws remain in effect. Farmers can burn “agricultural waste,” but must follow conditions in the open burning laws. Burning wastes that aren’t agricultural waste might require prior permission or notification, and it is illegal to burn some wastes due to the environmental harms they cause. Don’t get burned by failing to know and follow the open burning laws. Here’s a summary of important provisions that affect farmers and farmland owners.
What you can burn. Ohio law allows the burning of “agricultural wastes” under certain conditions. Ohio law defines what is and is not “agricultural waste” as follows:
Agricultural waste is any waste material generated by crop, horticultural, or livestock production practices, and includes such items as woody debris and plant matter from stream flooding, bags, cartons, structural materials, and landscape wastes that are generated in agricultural activities.
Agricultural waste does not include buildings; dismantled or fallen barns; garbage; dead animals; animal waste; motor vehicles and parts thereof; or “economic poisons and containers,” unless the manufacturer has identified open burning as a safe disposal procedure.
Agricultural waste does not include”land clearing waste,” which is debris resulting from the clearing of land for new development for agricultural, residential, commercial or industrial purposes. Burning of “land clearing waste” requires prior written notification to Ohio EPA.
If an agricultural waste pile is greater than 20 ft. wide x 10 ft. high (4,000 cubic feet), permission from Ohio EPA is necessary.
Where you can burn. Laws that affect the burning location relate to where the waste is generated and whether the burn is in or near a village, city, or buildings:
It is legal to burn agricultural waste only if it is generated on the property where the burn occurs. It is illegal to take agricultural waste to a different property for burning and to receive and burn agricultural waste from another property.
Burning inside a “restricted area” requires providing a ten day written notice to Ohio EPA. A restricted area is any area inside city or village limits, within 1,000-feet of a city or village with a population of 1,000 to 10,000, or within one-mile of a city or village with a population of more than 10,000.
A burn must be located more than 1,000 feet from any neighboring inhabited building.
How to manage the burn. Ohio laws impose practices a person must follow when conducting open burning, which includes:
Remove all leaves, grass, wood, and inflammable materials around the burn to a safe distance.
Stack waste to provide the best practicable condition for efficient burning.
Don’t burn in weather conditions that prevent dispersion of smoke and emissions.
Take reasonable precautions to keep the fire under control.
Extinguish or safely cover an open fire before leaving the area.
Local laws matter too. A local government can also have laws that regulate burning activities, so it’s important to check with the local fire department to know whether any additional regulations apply to a burn.
A bad burn can burn you. Violation of state and local open burning laws creates several risks for farmers and farmland owners. First is the risk of enforcement by the Ohio EPA, which has the authority to issue fines of up to $1,000 per day per offense for an illegal burn. According to the EPA, the most common violations by farmers include burning substances that are not “agricultural wastes,” such as tires and plastics, failing to meet the 1,000 foot setback requirement, and burning waste from another property. EPA enforcement officers regularly patrol their districts, investigate fires they see, and investigate complaints from neighbors or others who report burning activities, so “getting caught” is quite possible.
An illegal burn might also bring in the Ohio Division of Forestry or local law enforcement. Beyond the environmental provisions, other violations of the open burning laws can result in third degree misdemeanor charges. Penalties of up to $500 and 60 days of jail time per violation could result.
A final risk to consider is liability for harm to yourself, other people, or other property if a burn goes wrong. It’s possible for a fire to escape and burn unintended property, to reduce roadway visibility and cause an accident, or to interfere with people, animals, crops, or buildings. These situations can cause personal injuries, property harm, and could result in insurance claims or a negligence or nuisance lawsuit. Using common sense and taking reasonable safety precautions when conducting a burn can go a long way toward reducing the risk of harm and resulting liability for harm.
To learn more about Ohio’s open burning laws, visit the Ohio EPA website at https://epa.ohio.gov/divisions-and-offices/air-pollution-control/permitting/open-burning.
There has been a lot of discussion about the crop yields from 2023 in Ohio, from early reports of crop stress in May and June to greater than anticipated yield values for many producers this fall. Yield reports of >110 bu/ac wheat harvested in July were reported in parts of Ohio, and better than anticipated yields in some corn and soybean fields. Harvest progress of corn has been delayed from normal for many farmers.
Many questions have been raised on the role that haze from Canadian wildfires may have played on seasonal crop growth this year. Ohio experienced three major episodes of wildfire impacts on June 6-7, June 27-29, and July 16-17, with several more days throughout the two-month period of less intense smoke-filled skies. However, looking at 2023 compared to historical trends overall radiation availability was similar to the 10-year historical average for the three CFAES research stations of Northwest, Wooster, and Western (Figure 1). Light availability was higher than normal in May through mid-June, in part due to many clear days and below average rainfall. Light availability approached normal levels throughout June and July in part due to a slight reduction during the short period of haze, but recovered to mimic the 10-year patterns observed in recent past.
Despite the short haze periods, the photons available per heat unit accumulated (PTQ or photothermal quotient) were at or above the 10-year average (0-38% greater) aside from July at Western research station (6% lower) and September at Northwest (2% below normal). Generally, greater PTQ values suggest that more photosynthesis can occur in the same thermal period and could lead to greater yields.
Contrastingly, accumulated Growing Degree Days (GDDs) were below the 10-year average for every location this year (Figure 2). The same pattern that brought the frequent spells of wildfire smoke, northerly wind flow out of Canada, kept temperatures below average for the summer (Figure 2 – left). It is possible the cooler temperatures helped crop’s periods of water deficit better this year than in years past, but also can have contributed to the slow drydown experienced by many farmers this year.
Interesting to note, several folks have commented that this summer reminded them of the summer of 1992. Looking at that year’s temperature difference compared to average (Figure 2 – right), temperatures were cooler in 1992 than this past summer. Mt. Pinatubo erupted in June 1991 and is often pointed to as a main reason for cooler global temperatures in the year that followed. Volcanic emissions circled around the globe high in the atmosphere throughout the tropical and sub-tropical regions, reflecting and absorbing solar radiation and cooling the Northern Hemisphere surface temperatures by about 0.9-1°F.
Overall, the cooler temperatures and slower accumulation of GDDs can be the largest contributor to delayed corn harvest this year. Cooler overall conditions could have led to slightly higher than normal PTQ values for the season, which also may help explain the higher than anticipated yields in the wheat crop this summer.