Watch Out for Excess Farm Loss Rules

The 2008 Farm Bill put in place a tax provision that limited your farm loss to the greater of $300,000 or your cumulative farm income during the past five years if you received an applicable subsidy which was either:

  • A direct payment, a counter-cyclical payment or a payment in lieu of these items (the old ACRE program), or
  • A Commodity Credit Corporation (CCC) loan

The first items were eliminated with the 2014 Farm Bill, therefore, the only item left is if you received a loan from the CCC.  Most farmers had not been getting loans from the CCC for their crop, however many wheat farmers may have elected in 2016 to get a CCC loan instead of receiving a LDP payment.   We previously posted on how this may create an excess farm loss that you may not be able to deduct in the current year.  However, we did this post back in August, therefore, many of you may have forgotten about this.

Another loan from the CCC that many Midwest farmers may have is if they borrowed money from the CCC to build new grain storage facilities.  This is also considered getting a loan from the CCC.

Therefore, if you received a CCC loan this year and you have a farm loss greater than $300,000, you will need to check the excess farm loss rules to see if your loss is limited.  Remember that you cannot combine cash rent income that you report on your return to “reduce” the farm loss.

We believe that LDP’s are not CCC loans, therefore, this should not subject you to the excess farm loss rules if you only received LDPs.

  • Principal
  • CliftonLarsonAllen
  • Yakima, Washington
  • 509-823-2920

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).

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