Is a Christmas tree farm tax deductible?

Revenue Ruling 71-228, 1971-1 C.B. 78, provides that the costs incurred in taxable years ending after May 24, 1971, for shearing and pruning of trees grown for the Christmas tree market are deductible business expenses.

What are the tax benefits of owning a tree farm?

Tree Planting Costs A real benefit to tree farmers is that they can deduct the first $10,000 in costs per year for planting trees if the they are married and file jointly. Furthermore, a farmer can deduct the remaining expenses over eight years, thus saving even more money on his income tax.

How much profit do Christmas tree farms make?

With 200 trees per acre ready for harvesting each year, a u-cut tree farm could theoretically bring in $9,200 per acre annually. Most farms don’t generate this much revenue, though. Many max out their profits between $15,000 and $20,000 because there is a limited demand for Christmas trees in any one area.

Are there tax benefits to owning a farm?

California has a series of rules that get property tax benefits, ranging from 25 to 75 percent; the highest exemptions are for 100 acres or more with written commitments to not develop for a minimum of 10 years.

Is a tree farm a tax write off?

If you own a tree farm, you will likely be able to deduct a variety of expenses, including equipment and labor costs, as well as vehicle mileage.

How many years can a farm show a loss?

The IRS stipulates that you can typically claim three consecutive years of farm losses. In some situations, however, four consecutive years of claims may be possible.

Is a tree farm considered a farm?

Most IRS employees would say they are and in fact many tree farmers use Schedule F (Farming), Form 1040. If you are doing so there is no reason to change. The term “farm” (farming) is defined many places in the Code, but only within the context of the particular section to which the term applies.

What tax breaks do farmers get?

California, like every other state, offers property tax breaks for agricultural land. Specifically, farmers are able to take 20 to 75 percent off their property tax bill if they agree not to develop their land for ten years and do so with at least 100 acres.

What can you write off on taxes for a farm?

A farmer can generally deduct the following types of taxes on line 29 of Schedule F:

  • Real estate and personal property taxes on farm business assets.
  • FICA taxes paid to match the amount withheld for employees.
  • Federal unemployment taxes on farm employees.
  • Federal use taxes paid on highway motor vehicles used for farming.

Do you have to file taxes on a Christmas Tree Farm?

If the trees are greater than six years when harversted, they are considered timber in the tax code. Follow the IRS code Section 631 because a Christmas tree farm is considered a business. Christmas tree farms do not qualify for the reforestation tax credit. Offer hayrides as an additional service to patrons.

Capital Gains. One of the potential tax breaks available to tree farm owners is that sales of trees are taxed at capital gains tax rates. If you own the tree for at least 12 months, you are taxed at the long-term capital gains tax rate. Instead of paying taxes on the tree sale at your regular marginal tax rate, which is higher,…

Do I have to pay taxes on selling a tree?

If you own the tree for at least 12 months, you are taxed at the long-term capital gains tax rate. Instead of paying taxes on the tree sale at your regular marginal tax rate, which is higher, you get to pay taxes on it at the lower capital gains rate. Some lower-income individuals benefit from a long-term capital gains tax rate of 0 percent.

What are the costs of running a tree farm?

1 Exploring Labor Expenses. When running a tree farm, you most likely need to pay employees to help you manage it. 2 Capital Gains Tax Breaks. One of the potential tax breaks available to tree farm owners is that sales of trees are taxed at capital gains tax rates. 3 Equipment and Supplies. 4 Other Significant Costs.