Taxes - Depriciation of equipment

[OneLegJohn]

Thinking about actually going at this for real. I am fourth generation hobby producer- but we might as well use the experience (my Dad) and youth (my brother and I) Just curious if the accounting headaches are worth it. What is the depriciation on an evaporator? 10 or 15 years? Tractor? Buckets? Gas pump? Is it all the same? Has anyone written a book about Sugaring and the IRS? Is there a good website for the financial end of the business and staying within the lines?

[WESTVIRGINIAMAPLER]

John,

I have an accounting degree and report all my syrup sales and expenses. There is nothing set in stone on how to depreciate stuff, but the main thing is that you stick with whatever you start. From the best I could determine, tractors are depreciated over 7 or 10 years. I use straight line depreciation which is basically the same amount of depreciation each year for whatever the length of time. I depreciation all my maple equipment including evaporator, tanks, ect over 10 year period and will start doing the same with my tractor next year.

Hope this makes sense. :)

[maplehound]

I just give my accountant all my expenses and reciepts. He helps me break them down into difrent catagories, (tubing, fuel, addvertisment, large equipment, ect.) then he depreciates the large things , I think over 7 years, and I just let him handel it all. It has been well worht the money Ipay him. He did say that aI have about 5 yeara total to show a profit or we have to declare it a hobby and I lose the write offs.
Ron

[OneLegJohn]

Profit? What is that? I love the accounting classes I took - but I don't remember them.

[maplehound]

I think that is the money after all expenses. Unfortunatly there isn't ussually any :?
The accountant says that it only has to be a couple dollars though so I think I can manage that one year every now and then

[Sugarmaker]

My 2 cents,
I took a class at local H&R block place. I wanted to do my own taxes for the sugar and honey business. I learned that is to difficult for the average person to keep up on all the changes each year. So I now let them do the taxes on the business. We depreciate the building Drive way evaporator and equipment and the vehicles ( mileage). Keep good records on all aspects. Find a good tax person and let them do the work. I find it is worth it. I asked the question about the profit after 5 years also. They were not to concerned as long as your records show that you were trying to make a profit.

Hope this helps, I know we will get some responses on this topic.

Chris

[OneLegJohn]

I took a personal tax class in college. I learned enough not to do my own taxes.... I think that almost everyone on here is a hobbist. Why else would we be posting on a web site at 10 o'clock at night?! There are a lot better returns out there such as real estate or landscaping. But if a hobby can sustain itself - that is a dream job.

I am mostly interested in what and how I can take deductions.

[WESTVIRGINIAMAPLER]

Just carry over some expenses to the next year to show a profit. I showed one last year and a big loss this past year(2005). :D

[mountainvan]

here's what I've done. find an accountant that does farm taxes, f-form, and file as a fulltime farmer. I have done this for the last several years and have made out fairly well. On paper I will not make much money, but that does'nt mean I can't buy a new truck(just did). Keep receipts for everything, tolls to markets, gas(a big one now), equipment, clothes for work, etc.. My wifes family are dairy up north, never made a profit but have a good life!! also make sure you have good insurance, it's worth the money, I now know all too well.

[WESTVIRGINIAMAPLER]

I am also set up as a farm and that is good advice. As far as the insurance, definitely a good thing. I have a farm policy even though between my house and sugarhouse property, I only own an acre total. Since I produce an agriculture product, I qualify. I carry 1 million in liability on personal property and sugarhouse property and also carry product liability. Sounds like a lot, but I have my sugarhouse, tractor and all my equipment covered and it is not that expensive thru Farm Family. :D

[brookledge]

Brandon,
I don't think thats alot. I also carry liability ins. now adays 1 mill doesn't go far when some one is sue happy. You never know when somebody will claim they got hurt at your sugarhouse or say they got sick from your syrup.
Keith

[markcasper]

Just my thoughts on the tax situation. My tax accountant is very thourough and so far I haven't seen anyone mention anything about the minute deductions. My advisor allows a certain percentage to be claimed as "farm", including telephone, internet, electricity and the like. Add 10-20% of these totals up x #years youv'e been sugaring and its then a substantial amount and shouldn't be left out.

I've never asked my advisor this and is not necessarily maple related. When we all buy things that are not farm deductable and sales tax is paid, why can't the sales tax part be deducted. What we are really doing is paying a tax, upon a tax, upon a tax. I have my tax appointment Thursday and am going to bring this up. Mark

[maple flats]

I have a degree with an accounting minor. I would never do my own taxes. The yearly changes are unending and many tax questions are even debated among full time accountants. The tax system stinks, way too complex, nothing is cut and dry. That is why I have an accountant who does my taxes, farm (maple and blueberries, sawmilling, logging) and my rental properties (some duplexes) and my bus driving and my wife's at home nursing for fully dependant clients who live with us. Just too much to keep up on for the taxes. By the way, my accountant depreciates all major equipment over 10 years but the evaporator has a larger than typical residule value because it can be sold for much more than scrap value if taken care of.

[Kubbie]

Interesting thoughts on taxes. I throughly enjoyed some of your comments. I'm a CPA for 20 years, and make maple syrup now with my fiancee and honey with my Dad. You should report all your income and expenses on Schedule F. Farms are a less likely audited entity that other self-employed people. You should deduct all your direct expenses, jugs, fuel, etc. If you're small and have your electric hooked up to your house you should take a portion of your total electric bill, same with insurance, heat, prop taxes, mortgage interest, repairs & maint, sanitation, etc. IRS has a publication just for farmers. In New York you may qualify for a school tax credit, IMB credit and an investment tax credit for buildings and equipment used soley for farming purposes. Also, in New York you may qualify for an agricultural exemption on your property if you take in enough farming income. The IRS has a new QPAI credit this year that also applies to farming, but you need to have employees for that one. For 2006 there is a new credit for making your home more energy efficient, thats for eveyone not just farmers. I started helping Bill with his maple syrup 4 years ago, and I'm hooked. Its alot of work, but worth every drop. So I fill in my tax season helping him and I'm usually dead tired come April 15th. But the comments about finding an accountant that does farms is important because there are alot of special deductions that only apply to farms. I live in the catskills in NY and happen to do a fair share of farm income taxes. GOOD LUCK!