By Scout Nelson
Understand the Importance of Year-End Tax Planning
Agricultural producers benefit significantly from tax planning before the year ends. Reviewing income and expenses for 2024 can help avoid unusually high or low tax obligations.
“It is the time of year to think about year-end tax planning,” says Ron Haugen, a farm management expert. Using year-to-date estimates and depreciation, producers can spread income and expenses effectively.
Know Tax Deadlines and Filing Options
Producers can file their 2024 taxes by March 3, 2025, without penalties if no estimated taxes were paid. Those making deposits by January 15, 2025, gain additional filing time until April 15.
Maximize Deductions and Depreciation Benefits
Key provisions for 2024 include:
- Section 179 Deduction: Deduct up to $1,220,000 for eligible machinery and equipment.
- Bonus Depreciation: Take 60% depreciation for new or used property.
- Net Operating Loss (NOL): Carry back losses to offset previous income.
- Income Averaging: Spread tax liability across three prior years using Schedule J.
- Leverage Deferrals for Income and Insurance Proceeds
- Crop Insurance Deferral: Cash-basis taxpayers can defer proceeds to the next tax year.
- Livestock Income Deferral: Weather-related forced livestock sales allow deferral under special IRS provisions.
- Prepay Expenses and Invest in Equipment
Producers can prepay feed, fertilizer, and other expenses to reduce taxable income. Purchasing machinery or equipment before year-end enables depreciation or Section 179 benefits.
Contribute to Retirement Plans
Consider contributing to retirement plans like a simplified employee pension plan or an individual retirement account to secure tax benefits while planning.
Year-end tax planning ensures efficient financial management and sets up producers for success in 2025.
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Categories: North Dakota, General, Government & Policy