Re: Question for the hobby farmers?

Posted by kyhayman on January 03, 2009 at 07:00:48 from (75.104.128.58):

In Reply to: Question for the hobby farmers? posted by IaGary on January 03, 2009 at 06:26:00:

I went through this last year with the nice people from the IRS (full blown, come sit down with you at the farm for a couple of days audit). Expenses for the farm can always be deducted from income on the farm. Tax is on profit. My photography business/hobby is like that. There are different rules than for a business or farm but it is deductable up to the level of income. The real key is that if it is a not for profit venture then expenses cant be deducted from other income, like the job in town.

If you make a profit 3 years out of 5 you are assumed to be a for profit venture and a schedule F loss can be used to offset other income. If you show a schedule F loss more than that you can still be considered for profit BUT, the burden is on you to meet the criteria. You can have a loss for 20 or 30 years straight as long as you meet the burden of proof under their criteria.

States may have different rules for state taxes but by in large most states follow the US tax code in these kinds of determinations. For what its worth, I dont recommend getting the full blown tax audit but it was a real learning experience. Glad to have learned what I did, glad its over, and hope to not do it again.

Replies:

• Re: Question for the hobby farmers? rrlund 07:18:28 01/03/09 (0)

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