It’s almost tax time again and who couldn't use a few ideas to make that task easier? While tax scenarios and needs are uniquely personal, there are some tactics that are worth considering. Here are some year-end tax planning strategies that could help limit your tax liability.
Before 2008 comes to a close, consider these tips:
- Prepay farm expenses. Feed, fertilizer, seed and similar expenses can be prepaid. Typically, discounts are received by paying for these expenses in the fall. You can deduct prepaid expenses that do not exceed 50 percent of your other deductible farm expenses.
- Pay taxes or interest. Paying taxes or interest can be done before the end of the year to increase 2008 expenses.
- Defer income to 2009. Crop and livestock sales can be deferred until the next year by using a deferred-payment contract. Most grain elevators or sales barns will defer sales until the next tax year. Producers should be aware that they are at risk if the business becomes insolvent before the check is received and cashed.
- Purchase machinery or equipment. Machinery or equipment purchases can be made before the end of the year to get a depreciation or 179 expense deduction in 2008.
Information on other agricultural-based tax topics can be found in the Farmers Tax Guide, publication 225. You can get one from any Internal Revenue Services office or you can call (800) 829-3676. Any questions about these topics should be addressed to your tax professional or the IRS at (800) 829-1040 or www.irs.gov.
Source: North Dakota State University