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Tax credit for farmers who rent equipment to beginning producers

Tax credit for farmers who rent equipment to beginning producers

Pennsylvania has set aside US$5 million in 2020 for the Beginning Farmer Tax Credit program

By Diego Flammini
Staff Writer
Farms.com

Pennsylvania’s state government will reward established farmers who support new producers through a new program.

On July 14, Gov. Tom Wolf authorized the Beginning Farmer Tax Credit program, which provides a tax credit to farmers who sell or rent farm equipment, land or other assets to beginning farmers who have fewer than 10 years of experience.

Over the next 10 years, the departments of agriculture, and community and economic development will set aside US$59 million for the program.

US$5 million will be available for the 2020 tax year, and US$6 million will be allocated annually through the 2030 tax year.

The application window for the current tax year is open. Applications for future years will be accepted starting Feb. 1.

The tax credit opportunities operate as follows.

Established farmers can claim a credit equal to 5 percent of the sale price or fair market value, whichever is lower, of an asset sold or rented to a beginning farmer. That amount is capped at US$32,000.

For rental agreements the tax credit is equal to 10 percent of the gross rental income for the first three years up to US$7,000 per year.

Industry organizations are pleased to see the state government authorize the program.

The average age of a Pennsylvania farmer is 56.5 years, the 2017 Census of Agriculture said.

This tax credit program provides new farmers with opportunities to gain experience while incentivizing established producers to work with newcomers.

“One of the biggest challenges we hear, especially from first-generation farmers trying to access equipment and land, is how difficult it is,” Liam Migdail, communications director with the Pennsylvania Farm Bureau, told Farms.com. “The idea of this credit is to encourage older farmers to work with a beginning farmer.”

A bonus of the tax credit program is the potential mentorship opportunities between farmers.

New farmers may need guidance and advice, which their older counterpart can provide, Migdail said.

“We need that next generation to come in and be able to produce food,” he said. “It’s no secret that most American farmers are closer to retirement, but think about what a great resource someone with 40 years of farming experience can be to someone with five years of experience.”

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