Farm Tax Planning: Prepare for New Laws & Maximize Profit
Properly managing your taxes and records can lead to significant financial benefits, compliance with regulations and long-term sustainability for your farming operation. Daniel Coulthard and Eric Schmidt, managers of tax and accounting at Compeer Financial, share their insights into challenges and best practices as we approach 2025.
Key Trends & Developments in Farm Tax Planning
Schmidt expects that a tax bill before Congress will introduce changes, and he highlights the importance of making estimated payments throughout the year to adapt to end-of-year tax modifications. This proactive approach provides farmers more time to adjust their strategies.
Coulthard adds that changes in gift value regulations are also a concern, especially with today’s high value of land.
“Potential reductions in the lifetime estate tax exemption could prompt increased gifting to avoid estate laws,” explained Coulthard.
Both Schmidt and Coulthard emphasize the difficulty of planning for retroactive tax law changes, which could complicate farm financial management. Additionally, developments like advanced earned income credits in certain states, including Minnesota, and inflationary adjustments in Social Security and Medicare rates will require careful monitoring. These changes can significantly impact tax planning strategies, especially for those near income thresholds. Staying informed and flexible will be crucial for effective tax planning in the evolving landscape.
Online Tools For Farm Financial Management
Modern technology offers powerful tools to streamline recordkeeping and tax planning to maintain accurate records. By using software to leverage technology, Schmidt says farmers can make more informed decisions, reduce the likelihood of errors and save valuable time.
“Many farmers already use advanced technology like GPS and automated machinery in their operations, and they should apply the same approach to financial management,” said Coulthard.
Effective tax planning is not just about managing the present but also about planning for the future. Succession planning and estate taxes are complex issues that require prior and thorough planning.
“Start the transition process early, as it often takes many years to fully implement a successful plan,” advised Schmidt. “This proactive approach can help manage taxable income and ensure a smooth transition to the next generation. This proactive approach can help manage taxable income from year-to-year and eventually ensure a smooth transition to the next generation.”
For Compeer clients and all farmers, understanding and implementing effective tax planning and recordkeeping are essential for financial stability and growth. By staying informed about tax laws, leveraging technology and planning for the future, you can help ensure your operation is both profitable and sustainable.
Schmidt advises clients to spend their time on the things that can have the most impact on in their day-to-day operations, and let the experts handle the complex aspects of tax planning and accounting.
Consulting your relationship manager can help you learn more about Compeer’s farm tax planning and assistance options.
This article was taken from the 2024 fall edition of Cultivate. Read more from this issue here.
Farm Record Keeping and the Tax Connection
As a farm manager, using your records can help you plan for change, budget, track your operation's progress and can evaluate your operation's strengths and weaknesses.
Tax Services
Compeer Financial provides tax and accounting services to clients who live and work in rural America.
Transition Planning
Estate planning is vital to keeping your family farm. Compeer Financial provides resources to help you through succession planning.