The tax code in Minnesota has changed this year so everyone’s property taxes will be going up. This has made me wonder, would I be better off claiming this place as a Farm instead of a normal residential property? Does anyone claim their Hobby Farm as a “Farm” on their taxes?

I have read that if I do go the farm route that I would need to sell something for a profit within three years. I’m sure I can sell something but making a profit doesn’t really seem possible in the near future. The cost of hay, grain, minerals, medicine, new stock, equipment, fencing, clearing land, etc…, really puts the “hobby” into the “hobby farm”.

The chickens have paid for themselves and the goats may reach break even territory this year as well, but the start up costs won’t be made back in my lifetime. I figure that having some physical assets guarding against hard times my be more useful than a little extra money in the bank.


14 comments on “Taxes

  1. Ohiofarmgirl says:

    gosh i was just talking to someone about this. talk to your local tax person – there are some ways to get into the program. for instance it might be "good enough" if you have permanent fencing and are "attempting" to make a profit/business. and also consider the downside of having a farm business – the liability can be a crippler. our insurance (a military based one that i'm sure you know about) told us directly that if we had a business based on farm animals they would boot us before the sun went down. and some insurance companies will burst into flames if you sell eggs. email for more deets if ya need 'em.:-)

  2. Carolyn says:

    I believe you're mixing two things: An ag exemption for property taxes usually means you just need to be using the property for ag purposes -the sheep, chickens, goats would qualify you for that. The profit part comes in when claiming the farm for income tax purposes.

  3. Mary Ann says:

    We have been asked that same question several times… and also have not declared this a "farm". I wonder if we should… but also don't want to rock the tax boat, either. And profit??? Mwahhahahahahahahahaha!

  4. The 4 R's says:

    Property taxes here are assessed by the county. We have "Land Use" assessments for agriculture land. This lowers the property tax for land used for livestock/agriculture to an almost reasonable level. It really has nothing to do with income from the farm here.

  5. NancyDe says:

    I think it might mean a profit for the year. It depends on your method of accounting. The IRS has some publications on farms and accounting, and your County Extension might actually have some information on taxes. Ours just had a workshop on it.

  6. rkbsnana says:

    Lord knows I know nothing about taxes but our tax guy told us we only had a hobby farm because my husband won't sell his horses (they are pets). We do have a lot going out and none coming in except his love for the horses.

  7. Chai Chai says:

    OFG – I think we have the same insurance company. We just had an appraisal in order to refinance our place and the appraiser listed the goats and sheep as "pets".Carolyn – Thank you, you are correct. I think that just because "farming" isn't a business here it won't stop the property from being classified as used for agriculture.Mary Ann – I think I need an accountants advice. We don't discuss "profit" around here to avoid uncontrollable. roll on the ground, bouts of laughter combined with tears.4 R's – I searched the internet for hours last night and it looks like MN has a deferred tax system for agricultural land, this needs more research on my part.Nancy – I looked up the Extension office last night so I will call them this week, thanks.RKB – Lots of pets wandering around here, so far none have been eaten!

  8. Rain says:

    Good thing they supply the love-cause other then that-lose,lose business!!

  9. Teresa says:

    It's definitely something you want to talk to a tax expert about. I have claimed mine and didn't make a profit, but I do sell the kids and an occasional calf. There's a lot of leniency on the profit part. Now that I've purchased the crop land, I can show a profit and am a real farm. Certainly talk to someone.

  10. Chai Chai says:

    Rain – Some things are beyond price, or worth any cost!Teresa – I have heard that there is some leniency too, not a word often associated with the IRS!

  11. Kathrin says:

    Here in MA if we have a business we suddenly have to pay "Personal Property Tax" on all assets of that business. I had to laugh listing my used furniture, door used for a desk, etc. for my flower essence business. I'm scared to list my farm as a business because I'm worried I'll have to claim my tractor and all my tools as personal property and pay taxes on them. I don't understand this concept of paying taxes on stuff I already own……and paying every year. Sure penalizes me for just about everything. I do have my land under tax lowering use categories such as timber management and agricultural. I doubt I'll see any profit on the farm so maybe I'll just keep that quiet for now. ChaiChai, I lost your email and wanted to email you…..can you email me? Blessings to you all!

  12. In our county in Oregon, we have an ag exemption for property taxes. It reduces the property taxes and we have to make a certain amount of money per acre. Expenses don't come into the equation. Our property had it in place when we bought it. I don't know what it would take to have it added. Good luck!

  13. luckybunny says:

    I have no idea what it's like there. Here, because we have a large chunk of land, taxes were enough to absolutely kill us. Because we have mostly bush here (and huge marshes), we put most of our land in a managed forest program, which means we tend the land and keep up to certain practices and get a bit of a break, enough to help. It's impossible pretty much for us to claim ourselves as a farm here for tax purposes, you need to make at least $7,000 profit from the farm and that's darned near impossible with my crew. You should look into how much it is you need to make there to see if it's something that's possible for you to make with your farm. Also see if there are any other programs you could get involved in – that might be your ticket, sometimes there are hidden programs that can help, like we found. It's always worth checking out, in this day anything that helps makes a big difference. Good luck!

  14. Chai Chai says:

    Kathrin – I think the tax folks in MN have closed all the land loopholes for farmers, the only thing we can do here is defer taxes on property. That usage tax in Mass is horrible!Shannon – We can get a "Green Acres" tax deferment that would have to be paid back in later years – not really worth it in the back country where we live.LuckyBunny – Filing as a farm is a no go as we won't be making a profit in the near future. All I can hope for it seems it to fly under the "increase your taxes" radar.

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