Part II - More Tax Benefits
By: Gina Morgan
The following are some of the expenses which may be deducted from income for tax purposes:
- Cost of alpacas used for breeding.
- Veterinary care.
- Medication and supplies for livestock
- Feed, hay and minerals for livestock
- Cost of Agistment (boarding fees)
- Seed and plantings
- Breeding fees
- Shearing expenses
- Real property improvements such as barns and equipment
- Depreciation of vehicles designated for farm use
- Mileage for all business related travel (rate published by IRS)
- Travel expenses for farm (airfare, lodging and 50% of meals while traveling)
- Fuel and oil for farm
- Marketing and advertising expenses for farm
- Educational expenses and books purchased to improve your farming knowledge and your business expertise.
- Farm publications
- Interest paid (i.e. on financed livestock and other loans)
- Taxes
- Insurance expense on farm and on alpacas
- Professional fees (i.e. Attorney, accountant for tax prep and bookkeeping, etc.)
- Professional organization dues and fees (AOBA, ARI, MAPAACA, OABA, etc.)
- Show related expenses
- Rent and or lease on property, equipment, etc.
- Labor hired to help maintain farm
- Farm repairs and maintenance
- Tools having a useful life of less than one year
- Fertilizer and miscellaneous chemicals for farm (i.e. weed killer)
This is not an all- inclusive list. Farmers who are actively caring for alpacas every day are also eligible to claim the portion of utilities, telephone, etc. which are used for the farm.
It is recommended that you consult the IRS and section 179 for more information (www.IRS.gov). Section 179 allows a direct write-off method for newly acquired items that are normally long-term depreciable assets. The limit for section 179 deductions in 2006 is $108,000. It is best to consult an accountant who is knowledgeable in alpaca farming or at least in allowable deductions under section 179 and schedule F for farms. Another helpful IRS document is publication 225, The Farmers Tax Guide. It can be obtained at your local IRS office or online at the above site.
Losses can be carried back for three years and forward for fifteen years against future income.
Before any deductions can be taken, both active and passive farmers must include the following in his or her gross income calculations for taxes:
- Income from the sale of livestock
- Income from the sale of fiber
- Any agricultural program payments received
- Income from cooperatives
- Income from breeding fees
- Cancellation of debts
- Income from any other source, such as agistment or other services
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