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Tax Management Strategies for Catawba Cattleman's Association

Learn key tax strategies for managing farm income effectively, including optimizing deductions and planning ahead for a successful financial year.

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Tax Management Strategies for Catawba Cattleman's Association

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  1. 2012 Tax Management Strategies Catawba Cattleman’s Association Newton, NC October 9, 2012

  2. Knowing Your Numbers • If you can’t measure it, you can’t manage it • Bring your records up to date • 1st 10 months actuals, project Nov & Dec for net total income • Calculate a projected tax bill

  3. Plan to a “set” target net income • Increase expenses in last 2 months • Defer income into 2013 • Take more income in 2012 • Defer expenses until 2013

  4. Increasing Expenses if need be • Prepay expenses • Generally 50% rule • Ex: $30,000 in total expense, then $15,000 of prepay allowed • REMEMBER, expenses in 2012 increase 2013 income

  5. Increasing Expenses if need be • Use Sec. 179 expensing • Used and new equip • $136,000 is limit • $560,000 total purchase limit • Must have income • Farm or W-2

  6. Increasing Expenses if need be • Use AFYD or Bonus • New equip only • Presumption of law this is used, • Must elect out by class • NC does not conform to federal law

  7. Examples of Farm Income? • Market calf sales • Grain sales • Cotton sales • Custom work • Gov’t payments • Crop Insurance

  8. What is a Farm Business Asset Sale? • Land used in farming • Breeding animals • Equipment sales

  9. Where are Business Asset Sales Reported? • IRS Form 4797 • Part 1 • Land • Raised Breeding Animals (held >2 yrs) • Part 3 • Depreciated Equip • Purchased Breeding Animals

  10. Remember the Plan: An Income Target • W-2 income • Rental income • Farm Income • Other investments • Character of income • Ordinary, Capital Gains, SE taxable

  11. A pitfall to watch out for… • Repair vs. Capital Expense • Rule: Adds value, life or changes use, it’s capital and depreciate the cost • Ordinary and necessary, repetitive…it’s a repair

  12. A few non Business Ideas to Optimize Tax Paid • Retirement Plans • IRA, SEP, SIMPLE • H.S.A. • Can act like an IRA • Double Up Itemized Deductions • Property taxes, estimated State tax

  13. If…A Farm Loss • Consider paying alternative SE tax • Allows for continuing coverage for retirement and more importantly disability • Often paid by the EIC if qualified.

  14. Super Good year: Now What? Income Averaging may Help • The idea is to use unfilled lower tax bracket buckets from the previous three years. • Farm income • Schedule F • Sale of Farm Business Assets

  15. Useful Tax Websites • www.ruraltax.org • www.smbiz.com • www.timbertax.org • www.irs.gov • www.dornc.com

  16. Contact Information Guido van der Hoeven Extension Specialist/ Senior Lecturer Campus Box 8109, NCSU Raleigh, NC 27695-8109 919-515-9071 guido_vdh@ncsu.edu

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