It's Time - End of the Year Tax Planning

SOUTHWEST, NEW YORK (September 16th, 2024) – The sun is still shining, crops are still growing, and farmers’ minds are probably the farthest they possibly can be from tax planning. But – Fall is a great time to focus on tax planning and managing tax liabilities. By creating a tax strategy BEFORE January 1st, it’s easier to avoid those (always fun) December 31st equipment purchases and (less fun) stress and headaches.

Cornell Cooperative Extension Farm Business Management Specialist, Katelyn Walley, shares resources and information for farm business owners looking to manage their financial success. “Farmers have to wear a lot of hats, and the hats that have to do with paperwork often land on the bottom of the pile – particularly when the weather is nice,” says Walley. “However, tax planning in the Fall can prevent issues or added stress when it comes time to file in the Spring.”

All operating farms file annual business taxes where they report the farm’s income, expenses, and various other requirements. Cornell Cooperative Extension assists farmers in preparing for tax season by creating awareness, providing resources, and sharing helpful reminders. Recently, Cornell Cooperative Extension’s Southwest New York Dairy, Livestock, and Field Crops Team, shared key recommendations with farmers in their region which include:

• Work with the Right Accountant: Engaging an accountant who specializes in farm taxes can be invaluable. They offer guidance on complex tax rules, help maximize tax breaks and assist with long-term planning. Regular check-ins with an accountant, especially in the fall and during filing season, are crucial.
• Invest in Your Farm: Reinvesting profits into the farm through new equipment or improvements before year-end can be beneficial. These capital investments may qualify for depreciation, reducing taxable income. Additionally, prepaying for next year’s supplies can lower taxable income for the current year.
• Defer Income: Shifting income to the following tax year by delaying payments or sales can help manage tax liabilities. Income averaging is another strategy to spread higher earnings across multiple years, potentially avoiding higher tax brackets.
• Keep Good Records: Accurate record-keeping is essential for effective tax planning. Maintaining detailed records of income, expenses, and farm operations helps in maximizing deductions and avoiding penalties. A well-organized bookkeeping system allows for regular reporting and a clearer picture of financial status throughout the year.

Tax planning is not only about reducing what’s owed, but also about evaluating the farm’s overall financial health. By employing these strategies, farmers can reduce their tax liability and set their business up for success in the coming year.

For more information, or to learn more about farm tax planning, contact Katelyn Walley by calling 716-640-0522 or emailing kaw249@cornell.edu.

SWNYDLFC is a partnership between Cornell University and the CCE Associations of Allegany, Cattaraugus, Chautauqua, Erie, and Steuben counties. Their team includes Katelyn Walley, Farm Business Management (716-640-0522); Katelyn Miller, Field Crops and Forage Management (716-640-2047); and Amy Barkley, Livestock Management (716-640-0844). CCE is an employer and educator recognized for valuing AA/EEO, Protected Veterans, and Individuals with Disabilities and provides equal program and employment opportunities.

For more information about Cornell Cooperative Extension, contact your county’s Association Executive Director. Allegany County – Laura Hunsberger, lkh47@cornell.edu or 585-268-7644. Cattaraugus County – Kelly McDonald, kmm525@cornell.edu or 716-699-2377. Chautauqua County – Emily Reynolds, eck47@cornell.edu or 716-664-9502. Erie County – Diane Held, dbh24@cornell.edu or 716-652-5400. Steuben County – Tess McKinley, tsm223@cornell.edu, or 607-664-2301. 

Last updated September 17, 2024