Implementing effective tax strategies throughout the year allows family farms to harvest many of the tax benefits available. Reducing the stress surrounding tax time is possible. Consult a professional who is up to date with the latest farm income and deductions to be sure you are capitalizing on all your options. In the meantime, consider the following family farm tax tips.
1. Keep excellent records. Up-to-date record keeping is a must when running a family farm operation. Disorganized books make life difficult, and can trigger an audit.
2. Reduce tax burden through timing. Time your capital gains early in the year and your losses toward the end to offset gains and reduce your tax burden.
3. Borrow wisely. Separate loans to maximize your tax deduction opportunities. Split between personal and business loans to help you tax preparer file correctly.
4. Consider refinancing. Refinance your mortgage and roll that equity back into your business.
5. Plan contributions and investments. Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) allows you to minimize your taxes while capitalizing on your income.
6. Implement commodity wages for employees. Paying an employee in commodities is a strategy that creates payroll tax savings for both the employer and employee. Uses this strategy with spousal employees can help reduce farm net income and save on self-employment tax.
7. Take advantage of deductions. Consider all possible avenues for deductions such as the meal expenses. When meals are provided for employees on the work site and for the convenience of the employer, they are 100% deductible. This can quickly add up to a large savings.
8. Average your income. Discuss the possibility of income averaging with a professional. Shifting income across different tax brackets is a concept that a tax accountant can assist you with each year.
Finally, always file your tax returns and be sure to file on time. Contact us to learn more.
