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Changes in Farming Tax Law

September 15th

Over the last couple years, the Internal Revenue Service has made an inordinate number of changes to the tax code as it relates to the farming industry. While these changes are designed to simplify the tax code, the inconsistencies can often make filing particularly challenging.

Here are some of the key changes that have occurred over the last two years:

1. Standard Mileage Rate. The standard mileage rate for tax deductions relating to the cost of operating a vehicle for business purposes was changed to 50 cents per mile in 2010.

2. Limits on Farm Loss Declarations. From 2009, the IRS has mandated that farm losses are not considered tax deductible, if the farmer received certain subsidies for the amelioration of tax debt. Specifically, the limit applies to any farming business that received a direct or counter-cyclical payment under Title 1 of the Food, Conservation, and Energy Act of 2008, or any money from a Commodity Credit Corporation loan. However, this limit does not apply to excess farming losses resulting from casualties, disease, or drought.

3. Self-Employed Health Insurance Deduction. Beginning in the 2010 tax year, farmers may deduct any self-employed health insurance costs on a Form 1040, from total self-employment earnings.

4. Maximum Self-Employed Net Earnings. For the 2011 tax year, the IRS has instated a maximum limit on the self-employment earnings subject to Social Security taxes. This limit will stay at $106,800 for 2011. However, there is no maximum limit for self-employment earnings subject to Medicare.

 
 
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