By Robert Spencer

If you are reading this article, it is probably April and either you have already done your taxes for 2008 or you are scurrying about trying to get them done. If you have already done your taxes, this article will apply for 2009; if you are in the process of doing them, let this serve as a helpful reminder. As financial manager of your farm, it is up to you (and possibly your accountant) to fully credit all farm-related expenses and document assorted revenues. Whether you are fortunate enough to actually show a profit from your farm, or laugh in the face of adversity (like most of us), there may be a few items you are over looking.  

As far as farm-related expenses and deductions, take a look at some of the items we may overlook. From what I understand, this year a farm can claim real estate taxes paid. Don’t forget simple things like a portion of your utilities, interest paid (mortgage) and possibly office space in your house. If you have a cell phone solely used for the farm, it MAY be tax deductible. Was there a new computer or office equipment purchased for farm-related use? Go back through your records and see if there are any receipts for vet expenses. What always amazes me is travel-related expenses. Not just travel to meetings, but to the feed and supply store or building material store. You will be surprised how quickly all those short trips add up. Last year and this year on my personal farm expenses, I had about 2,000 miles each year for simple trips to local stores. At approximately 50 cents a mile that gave me about $1,000 in travel related deductions. 

Don’t forget those dues, memberships and registration fees for meetings. Take a look at your vehicle tag and insurance expenses specific to farm vehicles. Find those receipts for other items like building materials (for that new shed built last year), farm supplies (tools, hardware including bolts and screws), repairs and maintenance (repairs on the tractor, servicing the farm truck), breeding fees, as well as vet bills and livestock health care expenses (wormer, antibiotics). Also, don’t forget those magazine subscriptions relevant to farming, or that new animal purchased. And, find all receipts or canceled checks relevant to expenses for feed, hay, mineral and protein blocks. Ask yourself: was there any new farm equipment purchased this year and how do I want to write off the depreciation? Don’t forget depreciation on brood stock and herd sires. Do you have receipts for fertilizer, soil analysis (surely you do that) and lime? These are all important items to remember.

A few other items to consider: tax preparation services or tax preparation software if you do your own taxes. AND, two things my accountant reminded me of were last year’s federal tax refund (Alabama taxes require that) and that economic incentive check many of us received last year. Yes, that is considered income, even if it was our tax money coming back to us! 

Enough about farm expenses, time to take a look at farm revenues.

There’s livestock, grains, hay sold. Did you follow my advice (from an earlier article on getting lean) and sell off equipment no longer needed? Did you lease any equipment, your services or animals?

If you produce value-added products on your farm, make sure to document sales from those items. 

Always look for opportunities to improve record-keeping skills. My system is to have a box holding the entire year’s receipts and duplicate copy checks. Either quarterly, biannually or at the end of the year, my wife and I go through them and log them into a computer spreadsheet. The advantage of logging all this information into a computer spreadsheet is it allows for financial analysis when comparing expenses and revenues, including pie charts if you want to get fancy (make sure to use bright, cheerful colors). Then again, at the end of each year when I take a look at my expenses versus my revenues, I have to remind myself I farm because I enjoy it, and my wife tells me I need something to do with my spare time. 

I’m sure there are some things I failed to mention, but my hopes are you get the idea and think of many more things we tend to overlook. Take advantage of every deduction to which you are entitled, and include relevant revenues. It is easy to remember the big items, but the small ones do add up. I’ll be the first to admit that even though my educational background is farm management, I am not diligent in my record-keeping.

Try and keep a checking account for your farm separate from your personal account, it makes record-keeping somewhat more traceable. I’m not implying you will not use your personal checking account to cover farm expenses, but a separate account also allows for farm specific deposits. Whether doing your own taxes or utilizing a professional, you should claim all possible legal deductions; farming is a business and should be managed as a financial entity.

Robert Spencer is a contributing writer from Florence.