As I write this column, Congress has teed up a final tax bill, which likely will have passed by the time you read this. Although we don’t have a final vote yet, I would like to provide my thoughts on the most important provisions for farmers. Neiffer walks readers through six categories in the new tax bill that impact their businesses. Read more here.
On Aug. 8, the IRS released proposed regulations dealing with the Section 199A deduction, and we now have better guidance on the details. However, guidance on how farmers will calculate their Section 199A deduction when dealing with a cooperative are likely postponed to late 2018. Click here to read the answers to two common questions.
I continue to get questions regarding how much property taxes that a taxpayer can deduct on their tax return. Conclusion - Only real estate taxes on your personal residence (or vacation home) are limited. All of the real estate taxes paid on farmland will be treated exactly the same as under the old law. This post will recap what farmers can deduct starting in 2018.
Under the old tax laws, a farmer who had a bad year could create a net operating loss (NOL) that was allowed to be carried back five years to offset income reported in that year plus any subsequent years if the loss was that large. The farmer could also elect to carry the loss back only two years (if that was a high-income year) or elect to carry the loss forward for up to 20 years. The new tax law has changed all of these rules and most of the changes are not good for farmers. Click here to read about the changes.
This is a sensitive subject, but with the continued financial stress in the farm sector, we may start to see more divorces. For the last several decades, the tax laws have allowed alimony to be deducted by the paying spouse and be taxable to the receiving spouse. As wealthy taxpayers enter into divorce decrees that would try to maximize the deduction to the high-tax spouse and have the lower-tax spouse receive the alimony pay at a lower rate. Congress viewed this as an abuse of the tax law, so starting in 2019, the tax rules have changed. Read more here.