Will Your Farm Losses be Limited?
A few years back, Congress passed a new law limiting farm losses if the farmer received an “applicable subsidy” or got a Commodity Credit Corporation (CCC) loan. If the rules applied, the farmer could only deduct the greater of:
- $300,000, or
- Total net farm profits over the last 5 years
These rules applied to all taxpayers other than C corporations. An applicable subsidy related to the old direct payments, counter cyclical payments and ACRE payments. The 2014 Farm Bill eliminated these payments, therefore the only payment that would bring these rules into effect is a farmer taking advantage of CCC loans. Losses related to drought or other issues are unlimited and affected by this provision.
I am teaching a two-day farm tax session at Western Carolina University yesterday and today. While teaching yesterday, I reviewed the IRS Farmers Tax Publication and verified that only CCC loans will kick these rules into play.
Therefore, if you have a CCC loan and a large farm loss this year, check with your tax advisor to see if the loss will be limited.
Paul Neiffer, CPA
CliftonLarsonAllen LLP
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 Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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