Tactics to help cut taxes and capture advantages before the holidays.
All farmers know agronomic preparation pays. Making sure you are ready for planting through harvest can mean the difference between making and losing money on the farm. Tax planning is no different—the right tax strategy now pays dividends later. But 2017 is unique. Potential tax reform may offer Ag operations significant opportunity to reduce tax risk and save money –if they plan correctly.
“This year, maybe more than ever because of tax reform potential, we are strongly encouraging clients to do aggressive tax planning,” says Brad Palen, CPA with K·Coe Isom. “We sit down with clients and help them analyze all the potential ways they can manage their tax burden,” says Palen. “For example, deferring income could be a significant benefit to some operations if tax reform passes. But if you wait too long or don’t position yourself correctly, you may lose that opportunity.”
Good planning isn’t just about taxes, he notes. “We are also doing what we can to help with cash flow, which is a significant challenge for many farming operations in today’s low-margin environment.”
Tax & Ag Financials Year-End Checklist
Palen advises farm clients to work with their CPA to:
- Determine your estimated taxable income for 2017.
- Make a list of income or expenses—yet to be received or incurred.
- Build flexibility into your plan.
- Maximize use of lower tax brackets, deductions, exemptions, tax credits.
Pitfalls to Watch For During Year-End Planning
- It takes time to plan. Don’t wait to figure things out, create winning strategies, and build in flexibility (for example, incorporate existing depreciation elections or prepayments at the end of the year). With proper planning and guidance, considerations around cash flow impact and timing of income and expense before year end can generate huge tax savings.
- Wasting deductions (as well as exemptions and additional tax credits). Avoid loss situations with proactive planning.
- Not taking advantage of lower tax rates. Advanced planning can alleviate and minimize long-term tax burden.
- Guessing vs. Knowing. Don’t gamble with where you will end up, advises Palen. Guessing could result in some unfortunate surprises – whereas knowing and planning will capture opportunities and rewards.
- Wasted opportunities. Get in early and discuss pending grain or livestock sales, land prep, seed, chemical and fertilizer purchasing – seizing the right timeframe for the most advantages.
Time is of the essence. We are quickly approaching holidays, family time, and down time. Don’t let the end of the year sneak up on you. Your lender and your accountant need to be in the loop early to give your farm the time it deserves.
Have quesitons about how to maximize your tax advantages this winter?
FBN℠ members receive $1,000 off of K·Coe Isom services of $2,500 or more and receive a free consultation.
This blog contains third party product and service information including marketing and promotional claims which are the sole responsibility of such third parties. Third party products and services offerings are subject to availability and eligibility criteria which are established by the third party, and are subject to change at any time by the third party without notice. It is your responsibility to evaluate the suitability of the products and services offered by such third parties for your business.