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Accountant says overall, tax reform helped farmers

An accountant says overall, tax reform last year was good for farmers.

Austin Burby with Clifton Larson Allen CPA’s says, “It delayed some things from a timing perspective and a filing perspective, and also just had a lot of new stuff that we all had to try to learn and figure out and see how it all played together.” Burby says overall, the reform was a net win. “With tax reform at 21% flat tax for C corps and you go, ‘That’s great for a lot of people but our farmers who are filing as C corps, that’s an effective tax increase, so that’s not as friendly but on the flip side,” he says, “You’ve got that 20% business income deduction and a lot more favorable depreciation rules.”

Burby tells Brownfield several bankers are getting pressure from their internal credit departments, so farmers might want to show more income on their taxes and pay a little more to satisfy some lenders. “Farmers as a whole do not like paying income tax, but their historically-low rates, both as ordinary rates and capital gain rates, and it’s getting to make sense to maybe leave a little income on the tax return.”

Burby says with some improvement in some farm prices like dairy, farmers will also have to watch for limitations on losses prior to 2019. “There might be some traps there with some income tax and self-employment tax, depending on the structure and the setup.”

Burby says 2019 was a tough year, but many of his dairy farm clients were able to use improving second-half prices to pay down some debt and improve equity.

Burby’s advice for farmers is to look at the big picture and work with tax professionals on a proactive long-term tax plan, including succession plans and tax planning prior to succession.

The IRS 1099 miscellaneous income forms are due at the end of January.

Austin Burby with CliftonLarsonAllen CPA’s discusses farm taxes with Brownfield’s Larry Lee

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