backyard flock....taxable deduction as a farm????

Discussion in 'Managing Your Flock' started by ThreeGlovers, Feb 4, 2010.

  1. ThreeGlovers

    ThreeGlovers Chillin' With My Peeps

    Feb 15, 2008
    Beebe, Arkansas
    Anyone here know about the tax implications of trying to use a small flock as a farm deduction? Can it be used for deduction help without falling into a hobby category? Any tips or ideas?

    If this is the incorrect place for this please move into the correct place.

  2. dacjohns

    dacjohns People Cracker Upper

    It depends on the state and most likely the extent of your operation, expenses and profits.
  3. kennedyscochins

    kennedyscochins Chillin' With My Peeps

    Sep 1, 2009
    Big Clifty
    Quote:I am not at all a tax expert, but I contacted my tax advisors this past year and this is what they said:

    history: I have about 50 cochins that I plan to breed and sell eggs and chicks. They stated that if I am using them to try to make a profit (even though we all know this is next to impossible), then I can either claim it as farm income/loss or small business income/loss. I did claim mine as farm income/loss on this year's taxes. You MUST keep all of your receipts. You can count off anything and everything to do with chickens.

    I did understand it though, that if you are not raising chickens to try to sell (you are just keeping them for your own eggs), you cannot count this as a deduction on farm income/loss. This would have to count as a hobby.

    Like I said, I am not an expert, this is just what I was told and this is how I did my taxes.
  4. patandchickens

    patandchickens Flock Mistress

    Apr 20, 2007
    Ontario, Canada
    I believe there are extra/different tests applied to claiming things as *farm* income/deductions, as opposed to merely a business? (It has been 7 yrs since I lived in the US, and not only is my memory a bit fuzzy, things may well have changed since then anyhow). And for EITHER farm or just general-small-business claims, you had better be prepared to either show a profit a reasonable number of years (without overly fancy bookkeeping to achieve that), or to convince any auditor who might open your file that you are doing your dead level best to profit. Doing your best does not just mean yearning [​IMG], it means taking all normal prudent steps to improve profitability, and not staying in the business excessively long *without* profit.

    Because of the "audit magnet" nature of small deductions from ill-defined not-showing-a-profit businesses, it is worth thinking about wehther it is really worth it to ya, especially if it is not a genuine economically-integral business-oriented cold-hard-for-profit operation.

    Note that, at least in the states I ever lived in, income tax deduction status of farm animals was often (usually?) totally unrelated to whether you could, or could not, claim the property as a farm for property-tax purposes. That's usually a separate set of regulations.

    Good luck, have fun,

  5. Germaine_11.20

    Germaine_11.20 Chillin' With My Peeps

    Jun 6, 2009
    I am not sure and will have to ask the accountant, but he told me to save all my receipts because it is a "hobby farm?"
  6. tonini3059

    tonini3059 [IMG]emojione/assets/png/2665.png?v=2.2.7[/IMG]Luv

    Nov 6, 2008
    Southwestern PA
    I am curious of the laws as well. Everytime I go to tsc they ask me if I am tax exempt, which I am not and didn't think I could be since it was just a hobby. The last time I was talking to one of the employes and he said since I plan on selling eggs and call ducks that I may be able to qualify for tax exempt status. I have no idea where to find out the info to see if I qualify so I have not gotten anywhere. However if I have to keep all reciepts and be subject to audit I am not sure it is really worth the hassle. I plan on doing this indefinately whether I make a profit or not so I am not sure really what to do.
  7. cappy

    cappy Out Of The Brooder

    May 22, 2009
    Cottageville, SC
    In order to qualify you need to show a profit at least 1 out of 5 years. You also have to show your "intent" to make a profit in the business. I believe you would be better off as a business instead of a farm with just 50 chickens. Make sure you keep the receipts because you will need them. Like they said, this is an audit magnet, especially in these times of reduced income for the gubment.
  8. greenfamilyfarms

    greenfamilyfarms Big Pippin'

    Feb 27, 2008
    Elizabethtown, NC
    In NC, you will need to fill for a farm number with the NC Dept. of Ag.

    Just a side note, the forms needed to fill out the farm deductions COST. I worked for H&R Block for 3 years and those with farm deductions cost $300+ to prepare.
  9. Dar

    Dar Overrun With Chickens

    Jul 31, 2008
    I know here..there were a few things in order to get the tax deductions for a farm.

    you had to PROVE that you had $10,000 worth of sales in the last tax season (so for the year you are filing for) Lets say I was trying to claim an egg farm. my sales could be anything relating to chickens or eggs.
    feed, eggs, chickens, nest boxes, consulting fees* (you must have post secondary education or can prove that you are knowledgeable in the chosen field)..ect

    now this is the great part... even though you can show on paper that you have earned $10,000 before taxes.. you can now start making deductions for fuel, advertising, that may put you in the red.. they dont care about that, just that you made over $10,000 as a working farm

    BUT before you can put any deductions or tax break in place.. you must have a agriculture number so be registered with the government as a farm

    Ideally they would like this
    2008 track all income and deductions.. DONT CLAIM
    2009 Apply and obtain farm status, jump through their hoops
    in feb 2010 you can claim your farm stats when doing your 2009 taxes
  10. dacjohns

    dacjohns People Cracker Upper

    Quote:I was thiniking state taxes, forgot all about federal. Sorry.

BackYard Chickens is proudly sponsored by