Harvest a Break: Tax Deductions and Growing Your Own Food

Growing your own food can be both financially and personally rewarding: not only can you provide food for your local community, but you could conceivably become self-sustaining. In addition, you can also deduct quite a bit of your operating costs from your tax liability. Before you start tilling, check the tips below to help maximize your deduction and start harvesting tax return dollars.

Profitable farms only

First and foremost you most prove to the IRS that you intend to generate a profit from what you reap: hobby farms or self-subsistence farms do not qualify. This doesn’t mean you have to immediately start turning a profit: you can claim deductions for business costs as you work to get established. For example, if you spent money on livestock, tools, manure, and so on, you can deduct those costs from your tax liability so long as they are pertinent to your farm business.  The easiest way to do so is to maintain meticulous records of transactions. Do note, however, that if you don’t turn a profit for a least three out of five years the IRS may assert that your farm is a hobby and not a business.

It’s not just for food

The tax deduction is not just for food: you can claim the deduction to raise horses, cattle, bees, poultry, and even to produce building material for goods such as crafts or furniture. The same rules apply: you have to work to turn a profit and be able to demonstrate to the IRS that you intend to do so.

That also includes depreciation

Running a farm is no easy task, and accordingly you are likely to have lots of tools or machinery to help you out. Good news: major tools can be depreciated, and small tools are fully deductible. Again, you must have accurate records for the IRS to claim these deductions.

Not all states are the same

While all 50 states offer preferential tax rates to agricultural land, ease of claiming this break varies from state to state. Make sure you’re playing by the rules, obtaining any required permits and complying with zoning laws, and you should be able to reap the benefits on your return.

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