Ag Producers Should Do Year-End Income Tax Planning-2024

Nov 28, 2024

By Ron Haugen

Agricultural producers should do tax planning before the end of the year.

“It is the time of year to think about year-end tax planning,” says Ron Haugen, North Dakota State University Extension farm management specialist.

“When tax planning, it is best to start with year-to-date income and expenses, and estimate them for the remainder of the year,” says Haugen. “Estimate depreciation and include any income that was deferred to 2024 from a previous year. It is best to try to spread out income and expenses so producers don't have abnormally high or low income or expenses in any one year.”

Farmers and ranchers have until March 3, 2025, to file their 2024 income tax returns without penalty if they have not made estimates.

“Qualified farmers have until April 15, 2025, to file without penalty if they have paid their estimated tax deposit by Jan. 15,” says Haugen, “I would encourage producers to think about making a deposit by Jan. 15, 2025, if it looks like that will have a tax liability. That would give them more time to prepare their return and file on April 15.”

Here are several items to note for tax planning:

Agricultural producers are allowed to use 200% declining balance depreciation for 3-year, 5-year, 7-year and 10-year property. A 150% declining balance is required for 15-year and 20-year property.
For most new agricultural machinery and equipment (except grain bins), the recovery period is five years.
The Section 179 expense has increased. It generally allows producers to deduct up to $1,220,000 on new or used machinery or equipment purchased in the tax year. There is a dollar-for-dollar phase-out for purchases in excess of $3,050,000. Equipment must be above 50% business use to use Section 179.
The additional 100% first-year bonus depreciation has been phased down to 60% for the 2024 tax year. It is available for used as well as new property. It is equal to 60% of the adjusted basis after any Section 179 expensing. This provision is scheduled to phase out over time. For 2025 it is scheduled to phase down to 40%.
Net operating loss (NOL) carryback rules are in effect. Producers can carry back losses to offset income.
Like-kind exchanges are not allowed for personal property but are allowed for real property.
Income averaging can be used by producers to spread the tax liability to lower income tax brackets in the three previous years. This is done on Schedule J.
Producers may also may use Form ND-1 FA (income averaging) for North Dakota income tax calculations.

Other tax planning items to note:

Crop insurance proceeds can be deferred to the next tax year if a producer is a cash-basis taxpayer and can show that normally income from damaged crops would be included in a tax year following the year of the damage. This would include prevent plant insurance payments.
A livestock income deferral is available for those who had a forced sale of livestock because of a weather-related disaster. This is a very important consideration for producers who had to sell livestock because of drought. The IRS has two provisions for deferral. The first one is IRC 1033(e) in which a livestock producer who sells more draft, breeding or dairy animals than normal due to weather-related conditions may defer recognition of the gains for up to two years. A disaster declaration is not necessary, but if there is a federal disaster declaration the replacement period is four years. The second provision is IRC 451(g) in which a livestock producer that uses the cash method of accounting can elect to defer for one tax year the income of any qualified livestock sold due to weather-related conditions.
Prepay farm expenses. Feed, fertilizer, seed and similar expenses can be prepaid. Typically, discounts are received by paying for these expenses in the fall. Producers can deduct prepaid expenses that do not exceed 50% of their other deductible farm expenses.
Defer income to 2025. Crop and livestock sales can be deferred to the next year by using a deferred payment contract. Most grain elevators or livestock sale barns will defer sales until the next tax year. Producers should be aware that they are at risk if the business becomes insolvent before the check is received and cashed.
Purchase machinery or equipment. Machinery or equipment purchases can be made before the end of the year to get a depreciation or Section 179 expense deduction in 2024.
Contribute to a retirement plan such as a simplified employee pension plan, savings incentive match plan for employees or individual retirement account.

Source : ndsu.edu

Video: The 15-Year Bet Behind Every New Variety!

Canada is trying to decide how much agricultural research capacity it can afford to lose. Brian Rossnagel believes the better question is whether the country can afford to rebuild it.

The longtime barley and oat breeder makes the case with a simple fact about his profession: the consequences of today’s decisions may not become visible for 10 or 15 years.

“Pick the right parents. That’s the biggest thing,” Rossnagel says. “If you pick the wrong parents, you’re not going to get anywhere—and you don’t know that until 10 years, 15 years later.”

That warning carries particular weight as Agriculture and Agri-Food Canada moves to reduce spending and streamline parts of its science operations. The department’s 2026–27 plan anticipates the loss of approximately 665 positions by 2028–29 and says some research will be reduced where capacity exists in academia or industry. AAFC says the changes will make its science operations more cost-effective over the long term.

For Canada’s seed industry, Rossnagel’s career illustrates what is at stake.

This fall, the retired University of Saskatchewan breeder will be inducted into the Canadian Agricultural Hall of Fame. During his 35-year career at the Crop Development Centre, he helped develop more than 100 barley and oat varieties, including CDC Austenson—one of Western Canada’s most widely grown feed barleys. His induction recognizes not only those varieties, but the collaboration and research system that made them possible.

Rossnagel is quick to emphasize that none of it was the work of one person.

“The first thing I thought about was all the other people who contributed to whatever success I and my program had over the years,” he says. “We know that it’s not an individual who does this. It’s a group—a team.”

That team extends well beyond the breeder whose name appears beside a variety. It includes technicians, pathologists, quality specialists, statisticians, regional testing sites, seed growers and industry partners. It also includes the breeders who came before and those who will carry the germplasm forward.

CDC Fraser barley, for example, moved through three breeding careers. Its parents came from Brian Harvey’s program. Rossnagel advanced the material after Harvey retired, and Aaron Beattie later guided it through registration and release.

That kind of handoff is normal in plant breeding. The person who makes the original cross may never see the resulting variety reach farmers.

It also explains why lost research capacity cannot simply be switched back on when budgets improve.

“If you shut it off, it’s very, very difficult—and particularly costly—to start it up again,” Rossnagel says. “If you have to start from scratch, it’s going to be at least 10 years before anybody notices whether you’re getting anything done or not.”

The concern is not simply how many experimental lines Canada can process. Modern equipment, statistical tools and genetic technologies allow today’s breeding programs to evaluate tens of thousands of lines—far more than Rossnagel could handle when he entered the field in the early 1970s.

But efficiency and automation do not generate every idea.

“If you pare back down, and instead of having six or seven individual scientists concentrating on wheat breeding, you go down and say three people could handle all this, well, that’s half the ideas gone,” he says. “Particularly if you happen to lose the three people who had the really neat and innovative ideas, boy, that’s a problem.”

It is a timely distinction for Canadian agriculture. Consolidating programs may preserve the volume of material moving through a system, at least initially. It may not preserve the diversity of thinking, regional knowledge or willingness to pursue unconventional crosses.

That regional knowledge matters because Canadian agriculture is not one uniform production environment. A variety suited to southern Alberta may face different disease, moisture and maturity pressures than one grown in Manitoba, Ontario or Atlantic Canada.

“Agriculture is applied biology,” Rossnagel says. “Biology, all around the Earth, moves from the poles to the equator. It does not move from Newfoundland to B.C. like politics do.”