The homesteading life is all about providing for yourself by raising your own foods, cultivating your own livestock, and even getting back to a more basic kind of life. Unfortunately, even if you are stepping away from the fast-paced world of business and trying to get back to basics, taxes from Uncle Sam can still be a big pain. However, because you are essentially operating a small farm, you may be eligible for some out-of-the-ordinary tax deductions that can save you some money when tax season rolls around. Here is a short list a few tax deductions to be mindful of when you are a homesteader.
In order to qualify for tax deductions, you will have to claim your small farm as a business entity. Now, this may sound like something that will bring on more trouble than it's worth, especially if you only farm as a matter of sustenance. However, if you are making major investments in farm equipment and you make any profit, even if you just sell your extra harvests at the local farmer's market, you are technically running a business and these expenses can qualify you for a tax deduction. So whether it is a plow, new tractor, or other piece of farm equipment, it can be perfectly logical to create your hobby farm as an established small business to get these deductions.
The crops you raise on your property are crucial to your homesteading way of life, so you will likely invest a lot of money into keeping your crops and crop land as healthy as possible. From the manure you purchase from a neighbor to the compost pile you build out by the barn, you can deduct these items as business expenses for your small farm. If you have to hire someone to help you harvest in the fall or plant in the spring, what you pa them may also be tax deductible. So even if it is just a neighbor kid you hire for a few days, write them a check and keep it as proof of paid labor.
You have to put a new roof on the barn, the well runs dry and has to be redrilled, or you need gravel leading back to your crops from the field. All of these are examples of property upgrades that can be counted as a business expense for your small farm. Just hang onto all of your receipts and jot down a few notes as to why you needed to make these changes.
For more information, contact companies like Balkcom Pearsall & Parrish CPA's PA.