2008 Farm Bill Tax Law Changes & 2008 Farm Bill Tax Law Changes & Other 2009 RevisionsOther 2009 Revisions

Tax rules that apply to farmers and ranchers.

J C. Hobbs Assistant Extension Specialist

OSU Dept of Ag Economics

2008 Farm Bill Tax Law 2008 Farm Bill Tax Law Changes Changes

• Conservation Reserve Program (CRP) payments

• Preferential treatment for donation of conservation easements

• Endangered species recovery expenses• Depreciation for racehorses

2008 Farm Bill Tax Law 2008 Farm Bill Tax Law Changes Changes

• Limits on deduction of farm losses• Farm optional method paying for Self-

Employment Tax• Commodity Credit Corporation (CCC)

information reporting (1099-G)

Conservation Reserve Conservation Reserve Program PaymentsProgram Payments

• CRP payments received after 2007 not subject to Self-Employment Tax for farmers who are retired or receiving disability benefits.

• If not retired or disabled, must look at each situation to determine if SE Tax must be paid.

Conservation EasementsConservation Easements

• 2-year extension of charitable contribution deduction for cap gain property donated for qualified conservation purposes.

• For qualified farmer or rancher; the amount of the deduction generally will equal the FMV of the property on the date of the contribution

• Property must be donated during 2008 and 2009 tax years

Endangered Species Endangered Species Recovery ExpensesRecovery Expenses

• After 2008, expenses incurred or paid for management practices under the Endangered Species Act of ’73 can be deducted in the year incurred versus capitalized over useful life.

RacehorsesRacehorses

• Racehorses that are placed in service after 2008 and before 2014 are given a 3-year depreciable life no matter the age.

Limits in Deductible Farm Limits in Deductible Farm LossesLosses

• After 2009, losses in a year when Direct or Counter Cyclical payments or any CCC loans are received the loss is limited to the greater of $300,000 or total net farm income for the previous 5 years.

• Farm income = all income or loss from farming businesses.

• Disallowed loss is carried forward and deducted.• Excludes loss from fire, storm, drought, or

disease which are casualty losses and deductable in a different manner.

New Threshold for Farm New Threshold for Farm Optional Method for Self-Optional Method for Self-

Employment TaxEmployment Tax• Tax years after 12/31/07, farmers can elect to

get 4 quarters of coverage for Social Security retirement, disability, and retirement benefits .

• This provides farmers or the family to acquire the needed quarters of coverage to obtain greater disability or survivor benefits.

• A quarter of coverage for $1,050 of wages and now indexed for the future.

Information Reporting on Information Reporting on CCC TransactionsCCC Transactions

• New rule effective for farmers that repay CCC loans after Jan. 1, 2007, they will be issued 1099-G’s for the IRS 1099 matching program to insure proper reporting.

2009 Capital Gain Rates2009 Capital Gain Rates

• Capital Gain is the amount of the sale price in excess of basis.

• 0% capital gain rate for individual in the 10% and 15% tax brackets for 2008 through 2010

• 15% capital gain tax rate for individuals in the 25%, 28%, 33%, and 35% tax brackets.

Section 179 ExpensingSection 179 Expensing

• Assts with fixed life: 5, 7,10,15, or 20 years.• New rules for tax years beginning in 2009, the

section 179 expense deduction is $133,000 subject to an investment limit > $530,000 of property placed in service.

• Must not create a loss.• Purchased capital assets that must be

depreciable.

Contact InformationContact Information

J C. HobbsJ C. Hobbs580-237-7677580-237-7677

ororjc.hobbs@okstate.edujc.hobbs@okstate.edu