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Saturday, January 05, 2008

You got me. Can you answer this?

From Robbyn

A second specific question for Phelan and all: I have very little experience running my own business. We had a corporation for a while, so I have a little exposure. I was wondering about if there is some tax advice (no, i'll not hold anybody liable) about having something considered even on a small scale an "official Farm." I mean, do you have to declare something a farm or ranchette? Does this require different tax considerations? Who do farmers ask for advice on such things? I see that in some places you have to have licenses to sell produce at a roadside stand or there some advantage or disadvantage in being an "official farm" or can an individual just do it? Is it better to NOT be an "official farm" as far as not having to jump through government hoops and regulations?

A lot of questions, but we're in unfamiliar territory, and would like to be reading up...and learning from those who know already from experience.

To be honest, I have no clue. Laws will vary from State to State, as will the benefits of being a farm. You might want to check with the local extension office and your tax advisor on this. If you do not plan on doing any commercial growing or selling, I don't see any benefits to becoming a legal farm. But that is here, not your state. The only benefit my homestead would get is a tax break on feed.

Anyone else have an answer for this question?


Stephanie said...

For WV I know there is a huge property tax break if you qualify as being a farm. Beyond that I don't know....

BoysMom said...

You might call a local accountant (ask several farmers in your area who they'd recommend) and get together with them. Ours doesn't charge too much for a couple hours of consultation: of course she figures if we're pleased she'll be doing our taxes.
In our very small town, our lawyer knows less about tax laws than our accountant does (no such thing as a tax lawyer here).

Patrick said...

Talk about different laws between different states, I'm in Holland, so things are probably totally different here. Even though tax rules are different here, the basic philosophy may be similar.

In general all countries are keen to covertly subsidize agriculture as much as possible, and this often comes in the form of huge tax breaks. I wouldn't be surprised if you get an accountant to delve into it, if you find you end up paying very few taxes as an 'official farm'. For example here official farms can get very nice sales tax exemptions making their products cheaper to sell to end consumers, and there are really lots of similar tax perks that add up.

You may find government agencies even take the initiative to contact you directly with offers of minor subsidies and the like. For example, you might suddenly find out you are entitled to an energy subsidy for the electricity and gas you use, and so on.

At the same time, speaking in an abstract political way, governments are always keen to prevent smaller farms from 'unfairly' competing with larger ones. You might find if you are an official farm for tax purposes you get more attention from agricultural inspectors, who are keen to see you following the most minor of regulations.

This is at least what I would expect to happen here under similar circumstances.

Given55 said...

In Kansas, if you do not make money on the farm in three years, your farm is considered a hobby and the tax is incredible.

Phelan said...

Stephanie, it is the same here in Kansas, scroll down and see given55's comment.

Boysmom, wonderful advice!

Patrick, welcome. And you are right, the laws will vary hugely from State to State. And it is no different here when it comes to government and small farms. Thank you for the comment and advice.

given55, thank you.

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