January is the time of the year which farm managers begin their annual winter task of compiling their records to complete their schedule F tax form. Farmers can receive a free copy of IRS Publication 225, the Farmers Tax Guide, at their local county Extension office.
Click here to find the location of the OSU Extension County Extension offices
The farmers tax guide can also be obtained on-line at:
http://www.irs.gov/publications/p225/index.html
This year’s tax major tax changes include a new recovery period for certain machinery and equipment. Certain machinery or equipment placed in service after 2008 and before 2010 will be treated as 5-year property. The maximum amount you can elect to deduct for most section 179 property placed in service in 2009 is $250,000. This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $800,000. Under current legislation, the Section 179 limit is scheduled to drop back to $125,000 with indexing for 2010.
Farmers are also reminded that for the 2008 to 2010 period, individuals in the 15-percent or lower ordinary income tax bracket have a zero-percent tax rate on qualifying long-term capital gains. For individuals in the 25-percent or higher tax bracket, the tax rate on qualifying long-term capital gains is 15 percent. Earnings of up to $106,800 are subject to 12.4-percent tax for social security in 2009 with all earnings are subject to the 2.9- percent Medicare tax. For 2010, the maximum social security portion is unchanged as there is no cost of living adjustment for 2010 benefits.
Producers are encouraged to review Purdue University Professor George Patrick’s income tax publication written for agricultural producers. This 32 page paper explains in detail many of the new agricultural tax changes. Topics addressed include: reduced capital gain & dividend rates, child tax credit, charitable contributions, alternative minimum tax, depreciation and Section 179 expenses, new recovery period for new machinery, recovering lost depreciation, deferring income and pre-paying expenses, farm income averaging, crop insurance and disaster payments, casualty losses, self-employment tax, and gifts and donations of commodities. This paper can also be accessed at:
http://www.agecon.purdue.edu/extension/pubs/taxplan2009.pdf
All producers are reminded to obtain professional tax assistance as each farm business could benefit from different tax strategies.