Income Tax - General Ranching - HayTalk - Hay & Forage Community

Jump to content




Photo

Income Tax


  • Please log in to reply
8 replies to this topic

#1 endrow

endrow

    Junior Member

  • Members
  • 4195 posts
  • Locationcentral pa

Posted 22 November 2020 - 04:59 AM

Had a year that turned out better than expected. Ill probably lose all my Obama  Care Tax credits for me and the wife that will be about $23K  to pay in just for the premium s.. My AGI number is pretty high and i can spend /purchase to lower that but I don't want to be wasteful . I would prepay next years crop needs. and maybe  by 1 piece of equipment . I was wondering how hard you work to get your income tax down or do you just bite the bullet . 



#2 Vol

Vol

    Hay Master and Moderator

  • Moderators
  • 15515 posts
  • LocationEast Tennessee

Posted 22 November 2020 - 06:13 AM

I do all I can to legally get my tax liability manageable. Pre-purchase inputs is a very good way to reduce your liability as you stated. As poorly and reckless as our government spends money, I am not going to give them more to waste than I must. 

 

Equipment/buildings is another way to reduce liability.....and hopefully make your life more enjoyable by reducing your work load. 

 

Regards, Mike


  • endrow, gradyjohn, stack em up and 1 other like this

#3 stack em up

stack em up

    They say you’re a man of vision....

  • Members
  • 2991 posts
  • LocationWatonwan County MN

Posted 22 November 2020 - 07:15 AM

CPA recommends showing an income 1 out of 4 years. Doesn’t have to be much of one though. Dad prepaid a lot over the years, takes a bit of planning at retirement though cuz the taxes can get you.
  • Vol and endrow like this

#4 swmnhay

swmnhay

    Hay Master and Moderator

  • Moderators
  • 8565 posts
  • LocationReading,Mn

Posted 22 November 2020 - 09:29 AM

My CPA has me keep income close to same every yr.Also maximize a tax bracket.

Do a pretax Dec 1 so can decide how to juggle income/expense into what yr.

If the dems get there way they will want more taxes to pay for free stuff for others so maybe better off keeping income in this yr??


  • Vol, endrow, stack em up and 1 other like this

#5 r82230

r82230

    Hay Master

  • Members
  • 3784 posts
  • LocationThumb of Michigan

Posted 22 November 2020 - 07:58 PM

IMHO, there's more than a couple of things to keep in mind.

 

The tax law change that happened just a couple of years ago, will expire soon (2026 or sooner).   As Cy mentions utilizing the complete existing tax brackets is a very good strategy.  The only thing that might have a negative impact to that strategy is IF tax rates are reduced (which I think will have a snowball's chance in h... of happening).  The downside is naturally your insurance cost could increase.  :angry:

 

I would set down and run a 'what if', using several scenarios, looking at what your individual bottom-line looks like, not just now but in the future.   Eg, lowing income now, paying less for insurance verses higher income, higher insurance costs AND higher taxes in the near future.  IIRC, you're heading towards the SS FRA (Full Retirement Age, maybe age 67).  Deferring income until then can change the amount of SS that is taxable income (along with possibly paying more for Medicare, starting at age 65). 

 

Even things like increasing the corporate income taxation rate, IS going to effect things (cost of goods).  So buying 'things' now, could be cheaper, should be included in your analysis.  For those folks who don't think the corporations are going to pass increased taxes on, I got a bridge in the middle of the desert to sell you.  ;)

 

There isn't a one size fits all in this case, unfortunately.  :o

 

Larry


  • endrow likes this

#6 rjmoses

rjmoses

    Hay Master

  • Members
  • 4903 posts
  • LocationNear St Louis

Posted 22 November 2020 - 09:03 PM

My favorite is depreciation/resale.  Depreciate the devil out of equipment, then trade up.  Rquipment has been holding value a lot lately.

 

Ralph



#7 Trotwood2955

Trotwood2955

    Advanced Member

  • Members
  • 490 posts
  • LocationAugusta County, VA

Posted 23 November 2020 - 08:07 PM

Whatever you do, don’t end up worse off just trying to pay nothing in taxes. Between having a close family connection to a tax accountant that handles many farm accounts (including my own) and examples I see frequently through my “town job” I see or hear many cases of people who get in trouble financially trying to pay $0 taxes. Don’t get me wrong, I absolutely hate taxes for many fundamental reasons. But paying them also means I’m making a profit. I heavily utilize pre paying expenses, depreciation, and section 179 all depending on the year. We don’t buy or trade equipment solely to minimize taxes. We buy what equipment we need, only when we need it, and then depreciate/179 as best suited. Equipment purchases can really get people in trouble, especially if they finance it over 5-7 years yet use section 179 to write it all off in year one.

As always your CPA will know your situation and give good advice hopefully. And on that front I’d find one that knows how to have a balanced approach of minimizing taxes while looking out for your overall long term financial goals. Some CPAs focus on one thing, their clients paying $0 tax liability no matter what the cost.
  • r82230 likes this

#8 Trotwood2955

Trotwood2955

    Advanced Member

  • Members
  • 490 posts
  • LocationAugusta County, VA

Posted 23 November 2020 - 09:02 PM

One other thought I forgot to mention is using contributions to applicable retirement accounts to lower tax liability. May not work in your or all situations depending on age or other factors, but it’s a tool we use and one I see often overlooked in the ag community.

#9 gradyjohn

gradyjohn

    Senior Member

  • Members
  • 821 posts
  • LocationWhitesboro, TX

Posted 24 November 2020 - 12:41 AM

Had a year that turned out better than expected. Ill probably lose all my Obama  Care Tax credits for me and the wife that will be about $23K  to pay in just for the premium s.. My AGI number is pretty high and i can spend /purchase to lower that but I don't want to be wasteful . I would prepay next years crop needs. and maybe  by 1 piece of equipment . I was wondering how hard you work to get your income tax down or do you just bite the bullet . 

Congratulations for having the problem. Now is the time for that new tractor.






0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users

× Sponsors