Tax reforms that affect farmers are likely either this year or in 2017 after the next presidential election, says The Farm CPA Paul Neiffer.
“The top tax rate on business income—not just C corporations, but all business tax income—there’s a good chance that’s going to get tamped down to about 25%,” Neiffer explains. “Right now if you’re a C corporation, it’s 35%.” Schedule F businesses and others are taxed at a federal rate of about 40%
Paul Neiffer Describes Likely Tax Reforms in 2015 and Beyond
In return, two changes are likely, Neiffer continues. One is negative and one is positive.
The negative change for some is that more farmers might be required to shift to the accrual method of accounting. Farm family income would be grouped together—as with a father who farms with four sons—and would be affected if it totals more than $10 million.
“No longer are you able to do deferred payment contracts,” Neiffer says. “You can’t do pre-paids. You’re going to have to start recognizing more income earlier.”
The positive change is Section 179 should be made permanent at about $1 million, indexed to inflation probably at $100,000 increments.