My understanding is that beekeeping falls under "Farming" as far as taxation goes. I would like to write off the expenses I incurred to get my 60 hives this year. Does a beekeeper have to have a business license? What are the tax rules as far as write-offs go- can I write it all off in one year or do I have to amortize it over 7 years? Mileage can be written off also? I didn't purchase any large ticket item, just hives, bees, sugar, etc., but still cost a small fortune.
I am NOT a CPA. My "tax training" comes from being self-employed (carpenter) for the past 20 yrs.
A "business license" is not required to report income or loss on tax forms. Your city/county, state, may require a "license" to sell your product(s), especially on a retail level.
If you did not have an "income" from your bees, it might be wise to postpone as much of your "start-up" cost until you can use it to off-set some money earned.
You MUST have a receipt for ANY item(s) you wish to deduct.
Woodenware (hives) would be something that you might elect to amortize, but remember things like "sugar" are "operating costs" that must be deducted in the year purchased or lose the deduction.
"Mileage" used to secure materials - like sugar, pick up package bees or hives, is deductable in the year they occur. Mileage used must be documented. Its easy, when you have a vehicle dedicated for single use (company truck).
Remember, hobbies are not tax deductable. If you have a "loss" three years in a row, Uncle Sam says, "It's not a business".
Of course, if you sell ONE jar of honey, and want to pay taxes, just list as "Other Income" on your 1040.
Dave W . . .
A NewBEE with 1 hive.
First package installed
Beekeeping income and expenses are reported to the IRS on Schedule F.It is fairly easy to fill out.You can write off(expense) a certain amount(up to 25000 I think but I would have to check)of depreciable property in a single year rather than drag it out.If you have income from a real job,you can use a loss figure to bring down the tax on your other income.If not ,then depreciating your hives over a longer period might be better.With 60 hives you are in a business,but as was mentioned the IRS has rules on how many years you can show a loss.
"the IRS has rules on how many years you can show a loss."
Is this really the case? I was under the impression that after consecutive losses in some number of years, flags may go up that cause the IRS to look at you. I didn't think that it was against the rules to lose money in business - just that you may have to demonstrate to them that it is a business. Any CPA's here that know more about this?
I to was self employed many years. Several of these was raising nursery stock which falls into farming the same as Beekeeping. With nurserystock it takes several years for them to grow. The IRS takes this into account when doing audits. If you show a steady rise in income from your venture as well as expantion they do not bother you. Your expenses need to drop in proportion to the income coming in as you grow or they may ask questions. Since you have 60 hives you should have some income coming in next year. We showed a loss 8 years with no problems with the nursery. Our losses kept dropping and income kept coming up over the years. After about 4 years we made a proffit so we went out and bought a bigger tractor. They know businesses do not spring up over night. They find fault with businesses that keep lossing more and more money without any income.
As I understand it's not a hard fast rule but they want to see a profit two out of five years for most farming. But as long as you can prove that you were running it as a business, kept good records and had a plan that had the potential and intention to make a profit they will accept it. If not, then it is a hobby and is not deductable. I would plan on turning a profit at least two out of five years. In that sense it is sometimes better to write off a lot one year so that you have a better chance at a profit the following year.
The theory is if its losses from business operation and thats all you show, a loss year after year, then how long can you survive making nothing? Whats are you doing? Laundering money? Probably hiding something.
If you have a bee business and you do nothing but offset other income (day job), then after 2 years or the third year of losses, trigger red flags and probably an audit. You will have to show you are TRYING to become profitable. You can still offset most losses with income as it says you must show a profit, just never says how much.
Things to remember. If your operating a business, and taking losses or offsetting other income, than ACT like a business. Keep a business log, seperate checkbook, milage logs, keep reciepts, have your stuff in order. This is probably more important in an audit than anything else.
Each state is different. You may need a income tax number if your selling direct (other than a farm stand or place where its produced). Wholesale sales do not usually require tax collection. Whoever sells to the final consumer in most states, is the one responsible for tax collection.(except on the farm.) You may need a ficticious name registered. You may need a food handlers course or other certification to sell at retail establishments. Of course there is the new Federal food act registration, if your selling to markets etc.
As fed tax goes, anything with a use of longer than 1 year, or used the next year must be depreciated. Over the normal expected period of time. When they ask, just make sure you say your hives should last about 5-10 years. If you say 25 years, than its spread out that far.
Sugar, bee purchases, etc, can be written off entirely for that year.
No matter what I say or anyone else, talk to a tax professional.
You CAN expense your depreciable assets in the first year(within limits)It is called Section 179 expenses.But you do have to make sure it makes sense for your particular situation.In general,if you made a lot of money,you would want to maximize your deductions to lower your tax.You can buy more equipment (that you need anyway)or you can let the taxman have it. http://www.agriculture.com/default.s...x_html___50921
Mike must be preparing his taxes for the year....LOL
Nope,I put that job off as long as I can.
When did you start your business? Was the purchases before or after you began. Were they acquired as part of the business once started, or as start up costs prior to the business start? Are you deducting from the business income or from other income sources from your day job or your combined (wifes) income also? These questions effect how and whether they can be deducted the first year or taken over time.
ignorance is not an excuse, when the irs looks at you. Talk to a tax prep professional.
Seems like I looked into this 'taxing question' (pardon the pun) a few years ago. And to make claims on beekeeping expenses as a "farming" enterprise, I looked up the regulations involving farming. As I recall, in order to claim yourself as operating a farming business, more than 50% of your income has to come as a direct result from your farming operations. I believe this is still the criteria for listing farming as your occupation.
Disclaimer: I am not a CPA; opinions are like #!x's - everybody's got one; take two aspirins and call me in the morning.
There was a good general discussion of taxes for beekeeping in the April 2003 issue of The American Bee Journal (p. 273). The author discusses the section 179 deduction and mentions that it cannot be used to create a loss so he suggested that it is best applied in years of high profits.
Here is a fact you may find disappointing.
You buy a lot of equipment (hives), write-off the cost (depreicate or lump sum), you decide to sell all or any part, you OWE taxes on the amount received.
Here's the problem, if you cannot make a "go" of the bussiness (no profit) it will cost you money to "go-out-of-business".
And dont forget to file your "business property taxes" while you own the hives, you must pay taxes on ALL equipment used to produce your income taxes!!!!!
Have a safe New Year
To quailify under farming you must have so much land. I think the min. is 3 acres. If you grow a large garden with the soul purpose of selling vegtables you are farming. If you raise a big garden and only sell your extra produce it is not classed as farming. We got into this about 3 years ago. We were growing veggies in large plots. We had no personal garden. The nursery inspector came around to inspect our trees for shipment. He noticed our large plots of veggies. He asked if we had a garden spot for home use. We answered NO. His next question was did we use any of the veggies for home use. We did and answered YES. He informed us of the laws so now on we plant a little of everything in a plot near the house and call it personal use. The rest is listed under farming. As with most farmer raising products for sell we eat the produce that has the bug bite or is missed shaped. The garden spot is just there for show. You do need to see what the laws are in your area along with the fed. IRS laws. My father and I are going to go look at 27 hives this weekend if it is pretty. Another beekeeper going out of business. He said since I like working them so well he would put the cash up. This would take me to the number of hives I was planning on having in 2 years. If we get them I will claim them as a business.
This whole discussion is proof how far we have come from being a free country.We need less taxes and gov. intrusion in our lives .Unfortunately the trend is going the other way.Just my opinion.
Can someone tell me why "farm" and "non-farm" income is separated? What are the pros & cons of each?
Bees are farm income. No matter what the pros and cons.
Thanks all for your replies. And yes, we did make a lot of money this year (in things other than bees) and so I'm looking to minimize what Uncle Sam is going to steal from me. That was one big reason for getting into bees- to protect my wifes business income.
Well Curry,you cant beat bees for getting lots of money spent!