top of page
Search

Smart Tax Tips for Farmers: How to Keep More of Your Money in Agriculture

Farming isn’t just a labor of love — it’s a business. And like any business, the way you manage your taxes can save (or cost) you thousands of dollars each year. Most farmers don’t realize how many deductions, credits, and strategies are available to them. Whether you’re running a cattle operation, a market garden, or a mixed-use farm on a few acres, understanding your tax opportunities is essential.

Here are some of the most important tax tips every farmer should know — brought to you by Norma’s Basket Agriculture Agency.

Smart Tax Tips for Farmers: How to Keep More of Your Money in Agriculture

1. Deduct Your Farm Operating Expenses

Farmers can deduct ordinary and necessary expenses related to their operation, including:

  • Seeds, plants, and livestock purchased for resale

  • Fertilizer and soil amendments

  • Feed, minerals, and supplements

  • Veterinary bills

  • Equipment fuel

  • Repairs and maintenance

  • Marketing and advertising

  • Consulting and business plan fees (yes, that includes hiring someone like Norma’s Basket)

If it helps operate the farm, it likely qualifies.


2. Use Section 179 to Write Off Equipment

Section 179 allows farmers to deduct the full cost of qualifying equipment in the year you buy it instead of depreciating it over time.

This includes:

  • Tractors

  • Implements

  • Trailers

  • ATVs/UTVs

  • Solar systems

  • Barn equipment

If you’re scaling your farm, this can drastically lower your taxable income.


3. Deduct Interest on Farm Loans

Interest from loans used for:

  • Purchasing land

  • Buying equipment

  • Buying livestock

  • Operating expenses

…is deductible.Yes — even your FSA loans qualify.


4. USDA Grants & Payments May Be Taxable

A lot of farmers don’t know this:Many USDA payments, including NRCS and some grant funds, are taxable income.

However, the expenses you use the grant for are deductible — which helps balance it out.You need to track this extremely well to avoid surprises.


5. Keep Track of Your Fuel Tax Credits

Farmers may qualify for a fuel tax credit on fuel used for off-road purposes.

Examples include:

  • Tractors

  • Generators

  • Farm trucks that don’t drive on highways

  • Heavy equipment

If you track your usage, you can get money back at tax time.


6. Deduct Your Farm Home Office or Farm Headquarters

If you run your farm business from your home or from an office on the property, a percentage of your:

  • Utilities

  • Internet

  • Cell phone

  • Property taxes

  • Home repairs

  • Home insurance

…can be deducted proportionally.


7. Use Depreciation on Buildings & Livestock

Certain assets can be depreciated over time, including:

  • Barns and sheds

  • High tunnels

  • Fences

  • Wells and irrigation systems

  • Breeding livestock

This reduces your taxable income every year.


8. Deduct Conservation Expenses

If you invest in improving the land — such as:

  • Erosion control

  • Cover crops

  • Waterway structures

  • Soil and water conservation

These can often be deducted or amortized.

Farmers in NRCS programs benefit the most from this.


9. Track Your Farm Vehicle Usage

Farmers can deduct either:Actual vehicle expenses (fuel, maintenance, repairs) or the standard mileage rate.

Keep a mileage log for:

  • Supply runs

  • Hauling livestock

  • Deliveries

  • Market trips

  • Client visits

If it supports farm operations, it’s deductible.


10. Don’t Forget Family Labor & Hired Help

You may be able to deduct wages paid to workers, including your children, under certain conditions.

Paying family members legally:

  • Lowers taxable income

  • Allows income-shifting at lower tax brackets

  • Helps the next generation build financial responsibility


11. Use a Separate Farm Bank Account

This is one of the most overlooked business practices.

A dedicated farm account helps:

  • Track expenses

  • Prove deductions

  • Separate personal & business activity

  • Simplify tax filing

  • Strengthen your case for USDA loans

If it’s not documented, it didn’t happen.


12. Work With a Farm Tax Professional

Agriculture taxes are not the same as regular business taxes.Farmers qualify for:

  • Special depreciation rules

  • Income averaging

  • Disaster loss deductions

  • Farm-income averaging for low-profit years

  • Crop insurance income rules

A normal CPA may miss things that a farm CPA would catch instantly.


Final Thoughts

Farming is unpredictable — but your taxes don’t have to be.Good records, smart deductions, and the right tax strategy can save you thousands each year and help your farm grow faster.

If you need help with:

  • Structuring your farm business

  • Setting up your books

  • Understanding what you can deduct

  • Preparing for funding or USDA loans

Norma’s Basket is here to guide you.

bottom of page