I live next to farmers. Everything they do and own is a business expense. The business owns everything. Home, cars, utv, electric, propane, internet, new land, gas, desiel, and red desiel. They go on multiple caribbean vacations, rent out the banquet room and claim it as a business expense. Is this really what business are able to do?
In: Economics
I’m a farmer. We can write off our business expenses like every other business, but not our personal stuff. You just have some sour grapes. I cannot write off my home, cars, electric, propane, new land. I DO write off a portion of the internet and all the gas and diesel that powers the farm equipment. If i had a UTV I used on the farm I could write that off. If I wanted to go on a seed company vacation I could write that off, but since I don’t want to waste my vacation time in meetings, I pay for my own vacation with post-tax money.
It’s likely their entire house IS NOT a business expense. The square footage used for office, business storage, etc can be, but not likely the entire house.
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Most is “justifiable” gas? ya driving for the farm. Internet? needed for the farm, electric, well needed for the farm.
Where it gets looking funny to the government is if you are always receiving tax refunds and never paying for more than a few years
Farms are special. They don’t attract inheritance taxes and work in similar but different ways to normal companies (yay big land owners become MPs and get themselves out of paying tax for generations).
Also, if the farm owns everything, the farmer owns nothing. If they go personally bankrupt, then have nothing to sell (equipment doesn’t belong of the farmer, it belongs to the farm).
Short of the long: They can’t.
Longer answer: It’s not legal, but it really comes down to enforcement.
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* Home – They can deduct certain parts of the home, like a home office. However, they can’t deduct the entire thing.
* Cars – I see this one getting pushed often in rural areas. Vehicles are necessary for farming, so they have a legit business purpose. However, they’re not supposed to be used for anything other than business.
* UTV – Again, probably a legit business expense. Used for navigating the property.
* Electric/Propane/Internet/Gas/Diesel/Red Diesel – Technically, the can deduct the electric needs of the business operation, but they certainly can’t deduct their personal electric needs.
* Internet – Not unreasonable for a business to have internet. Questionable to be deducting the whole thing.
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Lastly, it’s worth noting that these “deductions” are as valuable as people love to make them out as. You still have to spend money on them. You can’t get around that.
The only thing that’s changing is the possible income tax. That’s going to be a fraction of the actual costs of the expenses.
To a degree, yes, absolutely. Especially with a very good accountant.
Typically it should be a percentage of those assets and expenses that was relative to how much they were used for the business.
Getting too smart or “creative” can cause issues with the IRS…but most people I guess just wing it and hope they never get audited at a time when they are being especially creative.
I think their presumed life of wealth as you put it is actually from different aspects of farming. You need to remember this land was likely passed down, is paid off, and worth several millions of dollars they can take loans out against. But not to mention, farming is almost completely risk free these days due to government subsidies and crop insurance. The fact is, if you are running a legitimate farm and have underperforming yield or complete loss during a season, you will be paid accordingly depending on your area’s weather and comparable yields from other farmers.
There is something called a benefit in kind. You can put things through the business but still have to pay tax on it. So it’s possible they are doing that.
Same as any other small business owner. You can only claim the expenses necessary to run the business, which may include vehicles and the fuel to run them, utilities, investments such as purchase of land. There is very limited latitude to claim gifts or entertainment for business associates.
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