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So I just purchased a piece of property and I have designs on trying my hand at farming. I'm well aware of how difficult that is in and of itself. In the short term, I'm going to purchase some equipment to get it going. Here are my questions:

Can I take a tax deduction for the equipment against my personal income (I have a actual job as well) or can expenditures of that nature only be deducted against actual income from the business?

If I purchase equipment now, can I deduct the value of that down the line, once and if I start making some profit?

If the entire thing is an abject failure, can I take a tax deduction for losses in any way shape or manner?

closed as off-topic by Pete B., Nathan L, JoeTaxpayer Nov 15 '17 at 20:45

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    tax questions require specifying the country. – mhoran_psprep Nov 15 '17 at 15:39
  • OP's previous questions used an United States tag. Unless specified otherwise, answering to US laws is probably safe – Nosrac Nov 15 '17 at 16:43
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    As befits a constituency with a historical high impact on US politics, farm taxation is different than other enterprises and can be detailed. Read IRS Pub 225 cover to cover as it is reasonably well written and addresses these topics in detail then revise your question if you still have one. irs.gov/publications/p225 – user662852 Nov 15 '17 at 16:50
  • Be aware that the IRS draws a distinction between a "hobby" and a "business". Hobby expenses are only deductible against hobby income. You should be prepared to establish that your farm is a good faith business and not simply a hobby. – Charles E. Grant Nov 15 '17 at 17:54
  • I think that I was just making a distinction that I don't have delusions about buying 10 acres and immediately making profit I meant "hobby farm" just as a synonym for small farm – user379468 Nov 15 '17 at 17:57
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Buying a piece of equipment is not a capital loss. You now have an asset that you can sell for some percentage of the original price. For most assets, that value decreases over time, and you can "write off" the depreciation of the value each year.

So you can deduct the depreciation of the asset from your business's income, which would then get passed on to your personal taxes (reducing the profit from your business). If you don't plan to use the equipment for some time, you might be able to depreciate the equipment based on the amount of usage, but I'd check with a CPA in your area to be sure.

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You can depreciate equipment as a valid expense, even for a sole proprietorship. The concept is simple, but the details are pretty complicated (and probably even more so given the added complexities of agricultural economics). Definitely speak to an accountant who specializes in the field.

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