Your browser doesn’t support HTML5 audio
Even though the new year has just gotten underway, it’s not too early to start thinking about taxes for your farm and the possibility that you may be leaving money on the table.
Brian Kuehl, Director of Government and Public Affairs with the ag business advisory company Pinion, says farmers and ag businesses should consider the Research and Development Tax Credit.
“A lot of farmers, a lot of food processors and ethanol producers rely on the Research and Development Tax Credit. This is a tax credit in the Internal Revenue Code that farmers and food processors can access if they’re taking innovative steps,” he said. “Most farmers live innovation. They’re trying new seed mixes or they’re trying new tillage approaches. They’re always changing up their operations to try to improve yield and try to increase profitability.”
Reports show many small businesses fail to even apply for the credit. In fact, the U.S. Chamber of Commerce says less than three out of ten businesses that would qualify apply at all, and the majority of those are large companies.
Kuehl says while it’s an important tax credit to remember, it’s not perfect.
“Congress, unfortunately, in 2017 made some changes that really hurt companies that rely on R&D. They repealed immediate expensing under section 174 of the tax code. That’s something we at Pinion have been working to try to reinstate. So that farmers who rely on research and development can expense deduct those expenses in the year in which they occurred, as opposed to having to expense them over four or five years,” he said.
The IRS has more information about the Research and Development Tax Credit on its website at https://www.irs.gov/businesses/research-credit.