TLDR: Farm life is busy. Bookkeeping often gets pushed aside. The end of the year is the easiest time to tidy up records while you still remember them. Cleanup now saves time and stress later when tax deadlines hit.
Farmers and ranchers work hard in every season, and winter is the one that gives you space to reflect on how the year went. It’s the least chaotic time to get your farm records and finances lined up, because you still remember what the summer expenses were for and you’re not actively trying to harvest, haul, and handle everything all at once.
Bookkeeping in the off-season isn’t just for taxes – it helps you see what you made, what you spent, and what needs a better plan for next year. If you filed an extension, your deadline moves to Oct. 15, but for most farms, April 15 is the main one. Sorting now gives your farm reports a chance to work for you when you’re planning the next season.
Here are 5 tips to help you prepare for tax season so you can continue to grow your farm.
Note: We’re not CPAs and this isn’t official tax advice, but we’ve seen what works for farmers, and we’re here to help make this season a little less stressful.
1. Know Your Tax Forms
Let’s start with the basics. If your farm is your primary source of income, you’ll likely be filing:
- Schedule F: Most farms lean on Schedule F for income: it’s the go-to form for agricultural income. If farming is your primary income, this is your lane for crops, livestock, and farm services. This is where you put in your profit or loss from farming. If your CPA tries to use Schedule C, double-check, they might be unfamiliar with farm-specific filings.
- Form 4562: This form is used on depreciation on things like equipment or fencing. Capital assets like tractors, fencing, and breeding stock need to be depreciated over time. If you’re DIY-ing, the “half-year straight line” method is a solid starting point.
- Form 1040: This is for your personal return, especially if your farm is structured as an LLC.
- Schedule C: This form will be used for side ventures like agritourism, value-added products, or farm-based services.
- W-2s and 1099s: If you hired anyone or paid a contractor more than $600, you’ll also need to send W-2s or 1099s by January 31. Most payroll software will do the heavy lifting here, you just have to make sure it knows who you paid and how much.
2. Make Your Estimated Tax Payments
Most businesses need to make quarterly estimated tax payments. Farms get treated a little differently. If at least two-thirds of your income comes from farming, the IRS lets you make one estimated payment instead, due Jan. 15. If farming makes up less than two-thirds of your income, quarterly estimates may still apply.
Don’t know what your estimated payment should be? You can pay either 100% of your tax owed in 2024 or two-thirds of the tax you’ll owe in 2025. If you’re uncertain, it’s safer to paying a little extra and getting a refund later usually hurts less than penalties stacked on top of a surprise bill in March.
3. Maximize Your Deductions with Smart Record-Keeping
This is where good bookkeeping pays off, literally.
- Mixed-use expenses: These are costs that serve both your farm and your personal life. For farmers who live on their land or use personal items for farm work, part of those expenses can count toward the farm. Think mortgage interest, home utilities, internet, insurance, and even phone bills or vehicles if they pull farm duty too. You don’t track the full cost, just the farm portion, logged or estimated.
- Vehicle mileage: This is for any miles driven for the farm using a personal or farm vehicle. If you’re driving an older truck or personal vehicle keep a log or use an app to keep track of your mileage that’s used for farm use. For newer vehicles, you generally get a bigger deduction by tracking actual expenses (e.g., loan interest, maintenance, gas, depreciation). Hauling produce, checking fencing, supply runs, moving equipment, farmers’ markets, animal care visits — all of that counts. The goal here is to track or estimate how much driving was for the farm vs everything else. The IRS gives a per-mile rate, so those logged miles turn straight into a deduction later.
- Loan interest: When you make a loan payment on land, vehicles, barns, or equipment, the principal is money you’re investing back into the farm, but the interest is the part that can be deductible. So the goal here is to keep loan statements handy and mark the interest portion during your year-end review.
- Receipts: This is your system for keeping proof of farm expenses. Paper folders, labeled envelopes, or digital tools all work if you stick with it. Aim to keep the last 7 years of receipts and interest statements accessible on purpose, especially for long-term deductions or audit safety.
4. Depreciation: Don’t Leave Money on the Table
Made a huge investment this year like buying a tractor? Installing irrigation? These capital assets depreciate over time and you can deduct that loss. You’ll likely use Form 4562 to report depreciation, and if you’ve made big purchases this year, talk to a CPA about the best depreciation method for your operation.
These are big farm purchases or upgrades that have a useful life longer than one year. Examples: tractors, irrigation systems, fencing, barns, storage buildings, breeding livestock, and infrastructure improvements. These don’t hit your books all at once. The cost gets spread out over years through depreciation, which means you can deduct part of the expense each tax season.
5. Don’t Forget State and Local Tax Breaks
Many states offer agricultural property tax and sales tax exemptions on farm-related buys. Savings add up quietly here.
Apply for agricultural property tax and sales tax exemptions! These exemptions are offered in several states and you can apply based on your farm purchases. Savings can add up, make sure to check your local regulations to see if you qualify.
Your books should work as hard as you do and bookkeeping can feel like a chore. Our bookkeeping services help you get a clearer vision in understanding your farm’s finances, and having organized books bring better deductions, fewer headaches and more time in the field as we head into tax season.
Interested? Book a meeting with us below to see if our services fit you.