Roger McEowen is an agricultural law and tax professor at Kansas State University and Washburn University. He offers these last-minute pointers to help farmers and ranchers as March 1 approaches.
“For those that file by the March 1 deadline, the return should pretty much be done by now. I would say make sure to look over the return before it is filed and did you properly claim all of the farm related deductions you are entitled to and can substantiate. If you weren’t able to deduct the amount of prepaid expenses that you were anticipating because of a lack of supply or high cost of inputs might have limited you in doing so, then you might want to consider making a farm income averaging election. If you purchased equipment and it was ready and available for use in 2021, did you claim the amount of depreciation that is optimal from a tax planning standpoint? Remember, 100 percent bonus depreciation may not be available after 2022.”
McEowen adds the key is to make sure your tax planning is in line with your management goals.
“Well, the answer is largely tied to what happens in the farm economy and how it impacts a particular farm or ranch operation. Every situation is unique. The key is to make sure your tax planning fits within your overall management goals and objectives and improves the bottom line. That may mean accelerating deductions and pushing income into the next tax year or it could mean the opposite. It might also mean that the timing of asset purchases matters. In any event, it’s imperative to stay connected to your tax professional.”