Tax Deduction Rules for Beekeeping - Page 2
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  1. #21

    Post

    Interesting..

    I searched this out and read a lot of IRS tax bulletins. Have you read them?

    Write-off is a term that I see misused. I now think of it as expenses in the business counting against the proifts of the business, not the expenses of the business counting against my income as a registered nurse.

    Descriptions of beekeepers as farmers when they have little land ownership is not well understood by me. USDA folks (or similar US agencies) that run the honey loan program wanted to turn me away as I did not "farm a crop" when I asked about these programs.

    I would develop an ongoing relationship with an accountant and let him help you out.

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  3. #22

    Post

    > Descriptions of beekeepers as farmers when they have little land ownership...

    I think the earlier posting about having to own some minimum acreage must be related to a state income tax law. I don't believe the Federal income tax law requires this.

    For instance, we don't have a state income tax here in Texas and I know several "farmers" who don't actually own any land. I think the old fashion term for this is "share cropping" - that is, they make a deal with the person who actually owns the land to grow some kind of crops on it, in exchange for splitting the profits earned from those crops.

    About the other person's question as to why 'farm income' is treated different than any other type of business income I believe has to do with all the special concessions in tax law given to farmers (not to mention all the other special ag programs for paying farmers to NOT grow something-or-other and paying them for having their land in soil conservation programs, etc., etc.). Besides, the American public usually is highly supportive of all these farmers "barely scraping by" (I supposed it's because of our agrarian roots as a nation).

  4. #23
    Jason G in Tennessee Guest

    Wink

    Hillbilly,
    So as long as I separate one hive aside
    from the others I can still eat those bees and get tax credit for the others in separate hives?

  5. #24
    Jason G in Tennessee Guest

    Wink

    Hillbilly,
    So as long as I separate one hive aside
    from the others I can still eat those bees and get tax credit for the others in separate hives?

  6. #25

    Post

    I have never dealt with it with bees. You could always slip a little to yourself without uncle sam knowing that you are counting that hives expenses with the business. It only becomes an issue if you are inspected like we have to be for growing trees. We grew some fruit trees. We were told that all produce grown from the stock plants had to be counted because of the expense we list for taking care of the trees. It was never much as we only had a couple of trees of each variety. So we told them we let the fruit fall. We never sold any but ate most of them.

  7. #26
    Join Date
    Jan 2003
    Location
    Miami, Manitoba, Canada
    Posts
    9,340

    Post

    >>write off the expenses I incurred to get my 60 hives this year.

    Are you claiming your income off your 60 hives? If yes then you get set up to claim expenses occured aginst that honey income. All expenses used to produce that honey can be claimed as an expense. By buying bees and equipment for your honey buisness, you can use it against or deferr your taxes to next year.
    If you take a loss in you honey veture, Im not sure how it works in the US, but here in Canada you can claim any farming loss incured in that tax year. I think it can only happen a few times before you get red flagged.

    Ian

  8. #27
    Join Date
    Jul 2003
    Location
    Bartonville, TX USA
    Posts
    476

    Post

    I am not a CPA just a farmer but this is my understanding.

    For farming and most other business ventures the IRS rule is 3 profitable years out of 5 except for Horses which is 7 years.

    One person needs to be farming full time but the rules are loose, can even be an uncle (family farm friendly rules). You don't have to use farming as your business class, many of the farming specific rules are crop and livestock related and not much use to a beekeeper. If you and your spouse both work and beekeeping is a sideline you may be better off to operate under a different set of rules than farm. You can use sole proprietorship, LLC, Corporation etc. They have different tax and liability implications.

    Documentation is important to prove you are not engaged in a hobby. While reporting income and paying taxes is a good way to avoid questions and audits if you choose to take losses in your first few years you can offset regular family income. If you incorporate you cannot do this - although you can carry forward your losses. What I've read about court rulings is the test is focused on intent to make a profit and that your activities reflect that intent. This is why mixing business and personal becomes such an issue - it dilutes your intent. The 3 profitable years out of 5 rule is not hardfast - if you can prove you are engaged in business and seriously attempting to make a profit then you can claim additional years of losses but you could end up in tax court too.

    Records of you time, expenses and mileage are important. One of the IRS test's is 500 hours spent on the business activity. They will want to see days, hours, and the activity.

    Section 179 was mentioned and allows you to accelerate depreciation. If you have a projection of what your business will look like (are you expanding? sideline? etc.) you might want to plan on when you want to make a profit and when to make your capital upgrades (and therefor Section 179 write-offs). You might want to report income early on before you are in a position that you have more income to balance against accelerated depreciation. Alternately, you might want to time your purchases of feed, chemicals, etc.

    I used TurboTax last year to do my return and it did a pretty good job of preparing the farm schedule. I had to read the rules on section 179 eligible equipment. This year will be a little more complicated with the livestock but we will see.

    I fully intend to make a profit at beekeeping the next three years - and have fun doing it.

  9. #28
    Join Date
    Jul 2003
    Location
    Bartonville, TX USA
    Posts
    476

    Post

    I am not a CPA just a farmer but this is my understanding.

    For farming and most other business ventures the IRS rule is 3 profitable years out of 5 except for Horses which is 7 years.

    One person needs to be farming full time but the rules are loose, can even be an uncle (family farm friendly rules). You don't have to use farming as your business class, many of the farming specific rules are crop and livestock related and not much use to a beekeeper. If you and your spouse both work and beekeeping is a sideline you may be better off to operate under a different set of rules than farm. You can use sole proprietorship, LLC, Corporation etc. They have different tax and liability implications.

    Documentation is important to prove you are not engaged in a hobby. While reporting income and paying taxes is a good way to avoid questions and audits if you choose to take losses in your first few years you can offset regular family income. If you incorporate you cannot do this - although you can carry forward your losses. What I've read about court rulings is the test is focused on intent to make a profit and that your activities reflect that intent. This is why mixing business and personal becomes such an issue - it dilutes your intent. The 3 profitable years out of 5 rule is not hardfast - if you can prove you are engaged in business and seriously attempting to make a profit then you can claim additional years of losses but you could end up in tax court too.

    Records of you time, expenses and mileage are important. One of the IRS test's is 500 hours spent on the business activity. They will want to see days, hours, and the activity.

    Section 179 was mentioned and allows you to accelerate depreciation. If you have a projection of what your business will look like (are you expanding? sideline? etc.) you might want to plan on when you want to make a profit and when to make your capital upgrades (and therefor Section 179 write-offs). You might want to report income early on before you are in a position that you have more income to balance against accelerated depreciation. Alternately, you might want to time your purchases of feed, chemicals, etc.

    I used TurboTax last year to do my return and it did a pretty good job of preparing the farm schedule. I had to read the rules on section 179 eligible equipment. This year will be a little more complicated with the livestock but we will see.

    I fully intend to make a profit at beekeeping the next three years - and have fun doing it.

  10. #29

    Post

    For farming and most other business ventures the IRS rule is 3 profitable years out of 5 except for Horses which is 7 years.

    This is what I was getting at. I lost money the first 4 years in my firework business. One of the things the CPA said was he was glad I list each tent with thier location to help prove I was growing instead of using it as a write off. With horses you can go upto 10 years without showing proffit if you prove you are growing. This means you need to have your income from the business increase along with the losses getting smaller. With my tents I used a rapid deprecation for my tents. The third year was the year I purchased the second tent. The fifth year I showed a $7,000 increase since the tents were depreciated out. And this business has a selling time of 2 weeks and one day. You can keep showing losses if they and you can see the light at the end of the tunnel.

  11. #30
    Join Date
    May 2003
    Location
    michigan
    Posts
    391

    Post

    Ill make a suggestion of using a specialized cpa to work on your taxes if you have a significant percentage of income from bees or are starting to spend large sums accumulating equipment, etc.

    When you start talking about depreciation schedules, self employment taxes, farm income averaging, schedules J/K, what type of organization (sole proprietor, LLC) works best, bla, bla, bla, a good CPA can be valuable regarding taxes and your short/long term financial goals. Further, a CPA who often deals with farm returns is ideal. He/she will know the exact codes which apply specifically to farm incomes.

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