There are many types of tax credits that farmers can use. From local state tax credits to Federal programs, farmers have resources at their disposal to reduce their tax burden.
Local communities benefit from the production of value-added agriculture in their area. While many farmers are eager to grow food to feed their neighbors, running a farm can be a financial risk.
With agriculture tax credits for farmers, you can continue to grow your farm and produce stellar goods for your community. Keep reading to learn more about these credits.
What are the Tax Credits for Value-Added Agriculture?
There are quite a few tax credits that benefit farmers who produce value-added agriculture. One such tool is the Fuel Tax Credit. Small business that qualify may use this credit to receive reimbursement for the sales tax incurred when purchasing fuel.
Another great credit to keep in mind is the Earned Income Tax Credit (EITC) especially if you have just established your farm. Farmers who have low income or have yet to make a profit benefit immensely from this credit.
You may also be eligible for a Research and Development (R&D) tax credit. This credit rewards innovation and creativity in the creation of new goods or improvement of process.
Calculating the R&D Tax Credit
Three basic expenses are needed to calculate your credit. You’ll need to add together the:
- Wages/Salaries of those involved in R&D projects
- Cost of disposable supplies purchased for R&D projects
- 65% of contractors hired to work on R&D projects
These expenses are known qualified research expenditures (QRE), and you can expect to recoup between 7-10% of these QRE if you qualify. Use this free R&D tax credit calculator to see how much your credit could be.
If you want to learn more about taxes and tax tips for farmers, you can review the Farmer’s Tax Guide provided by the IRS.
In Summary: Tax Credits for Value-Added Agriculture
Farmers quite literally fuel Americans, and tax credits fuel the production of value-added agriculture. With tools like the EITC and R&D tax credit, farmers are supported in their mission to provide delicious and healthy food to their local communities.
Don’t wait to learn how you can use the R&D tax credit to grow your farm. Contact the Research and Development Tax Credit Team today.