By Sandy Buxton, CAAHP CCE
It is one of those years everyone dreams about, milk prices were high, grain prices fell, beef prices stayed strong and the weather was reasonably cooperative.
But now, we have to pay the piper. The goal should be to make a decision and choose a solution which saves money but still advances the basic goals and tenets of the business.
Income was high, the government removed one of the favorite investment crutches of businesses, Sec. 179 – the fast depreciation method for new purchases. In 2014, it caps at $25,000. Only regular depreciation will be available.
The pre-purchase treadmill is available where you buy up to 50% of some supplies you are going to use in 2015. But since you probably already did that in 2013 to stave off payments in 2014, you have to buy more.
Income averaging might be another excellent solution. This system has the farm carrying back income to 3 previous years and spreading out the high jump. Often, the resulting tax liability can be less than doing nothing.
Or the less traditional opportunities are still available – pay income to a family member (read: child) for age appropriate labor. A deductible expense which could also begin to fund an Individual Retirement Account or IRA for the future. Another option would be for the business owners to contribute to a retirement plan. While IRA contributions are capped fairly low, some simplified employer plans may allow for over $10,000 to be contributed.
Of course, paying the tax bill is still an option since it will help earn “quarters” toward Social Security.
For farms who are looking for some info, make sure you plan to take part in the CCE Tax Planning and Financial Strategies Class on December 2 in Ballston Spa. Call 518-272-4210 for more info.
