As an agribusiness owner, you know firsthand the hurdles faced when grappling with market shifts, weather uncertainties and ever-changing regulations. Proactive tax management can make a world of difference in your bottom line and help you quickly troubleshoot when unexpected events like this occur.  

Below are some key agribusiness tax strategies to ensure you’re maximizing tax deductions available to you and minimizing your overall tax burden: 

• Deduct Your Farm Expenses: Deductible farm expenses include seeds, fertilizers, pesticides, fuel, repairs, maintenance and labor costs. Keeping detailed records of these expenses is essential for claiming deductions accurately in your Schedule F.  
• Leverage Farm Income Averaging: Farm income averaging allows you to spread income over multiple years, potentially reducing tax liabilities in years of high profitability. Understanding the eligibility requirements and implications of farm income averaging is essential for maximizing its benefits, so be sure to work with a trusted tax pro, like those at Doeren Mayhew. 
• Maximize Your Bonus Depreciation Deduction: Agribusinesses can deduct the cost of certain assets, such as farm equipment, buildings and machinery, over time through bonus depreciation. Understanding the different depreciation methods agribusiness owners primarily use, such as straight-line depreciation or accelerated depreciation, can help maximize deductions. The differences between both include: 
  • Straight-line depreciation: Spreads the cost of an asset evenly over the time it will be used, also known as its "useful life." It requires only three inputs to calculate: asset cost, useful life and estimated salvage value — meaning, how much the asset is likely to be worth at the end of its useful life. 
  • Accelerated depreciation method: Front loads the depreciation expenses to the first few years of the asset's useful life and has lower expenses as the asset grows in age. 
• Leverage Section 179 for Equipment Purchases: Take advantage of Section 179 to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. This can significantly reduce your taxable income and improve cash flow, allowing for reinvestment in your agribusiness. 
• Conduct a Research and Development (R&D) Credit Study: Agribusinesses involved in any research associated with the design, prototyping and development of any farming improvements or new product testing may qualify for an R&D credit. With an R&D credit study, businesses can identify qualifying R&D activities and expenditures and later capitalize and amortize these costs over five years for domestic activities. Previously, taxpayers could expense research and experimental (R&E) expenditures in the year paid or incurred, however, the Tax Cuts and Jobs Act revised this rule. There was proposed legislation to revert to its previous tax rule, but nothing has been passed to date. Conducting an R&D credit study can be complex, so it’s important to enlist a trusted tax pro to ensure compliance and maximize its benefits.  

Navigating tax implications for your agribusiness requires careful planning, attention to detail and a thorough understanding of applicable deductions, credits and strategies. Proactive tax planning with the right tax partner can help identify savings opportunities and minimize surprises. Rely on our agribusiness tax pros to guide you through evolving tax regulations and ensure you are taking advantage of every opportunity available.