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Beginning Farmer Tax Credit
By David Bau
 
In May 2017 a new tax credit for Minnesota beginning farmers became available.  The new law provides tax credits for the rent or sale of farm land or a variety of farm assets to beginning farmers.  Agricultural Assets include: land, livestock, facilities, buildings and machinery used for farming in Minnesota.
 
To qualify as a beginning farmer you must be entering or entered farming within the last 10 years.  You must provide a majority of the labor and management for farm located in Minnesota.
Have adequate experience and knowledge for type of farming you are engaged in.  Be able to provide positive projected earnings statements.  You are not directly related to owner of the agricultural asset.  Have a net worth that does not exceed current limit of $800,000.
 
The beginning farmer will need to participate in an approved financial management program.  Costs of this program may also be eligible for a tax credit for 3 years for maximum of $1,500 per year.
 
Credit to the agricultural asset owner include: 5% of the lesser of the sale price or fair market value of the agricultural asset up to a maximum of $32,000, 10% of gross rental income in each of the first three years of a rental agreement up to maximum of $7,000 per year, 15% of the cash equivalent of the gross rental income for the first three years of a share rent agreement up to a maximum of $10,000 per year.
 
The asset owner can claim only one of the above credits in any given tax year up to the maximum stated.
 
The Rural Finance Authority is administering the tax credit by certifying beginning farmers, assisting beginning farmers in locating an eligible financial management program in their area and certifying that owners of agricultural assets are eligible for the tax credit. 
 
This is a first come first served initiative.  The maximum amount available in 2018 is $5 million, increasing to $6 million in 2019 and remains at this level through  the 2023 tax year.
 
The asset owner may be an individual, trust, or a qualified pass-through entity.