Financial Incentive Programs are Available to Farmers Investing in Agricultural Innovations.
The Agriculture industry literally fuels America. So, it may come as no surprise that there are tax credits for value-added agriculture and agricultural innovations. Unfortunately, many farmers aren’t aware of these programs.
Keep reading to learn more these financial incentives for farmers.
Are There Federal Agriculture Tax Credits?
The Federal government does offer tax credits that can prove useful to farmers. Two of these options include the Research and Development (R&D) Tax Credit and Solar Power Tax Credits. Let’s take a more in-depth look at these credits and how they function.
The R&D Tax Credit
The Federal R&D tax credit program rewards farmers for time and money spent on research and development. Through this program, 7-10% of qualified research expenditures (QRE) can be recouped in the form of a credit. QRE include:
- Part and full-time pay of R&D focused employees
- Cost of disposable supplies used for R&D
- 65% of R&D contractor fees
You can enter those figures into a free R&D tax credit calculator to see what your own credit could be. That credit can then either be used against the social security portion of your payroll tax or your business income tax.
Solar Power Tax Credits
According to the U.S. Department of Energy, there are two types of solar power tax credits available for farming entities. These are the Investment Tax Credit (ITC) and the Production Tax Credit (PTC).
The ITC reduces your federal income tax liability for a percentage of the cost of a solar system that you installed during the tax year.
On the other hand, the PTC is a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a system’s operation. Adjusted annually for inflation, this credit reduces your federal income tax liability.
While you can’t usually claim both the ITC and the PTC for the same property, you could claim them for different systems at the same location. Take note of any additional guidance the IRS issues on this credit.
Do States Offer Tax Credits for Agricultural Innovation?
Many states offer a variety of tax credits for farmers. For example, Pennsylvania offers a state R&D tax credit as well as a Beginning Farmer Tax Credit Program.
Want to know if your state offers a similar program? You can read this quick article to discover how to get a state R&D tax credit.
How to Get Tax Credits for Agricultural Innovation
Farmers fuel the country through hard work and adaptation. Thankfully, the Federal government offers Solar Power Tax Credits and R&D tax credits to qualifying farming entities.
These credits, along with financial incentives offered by state governments, can dramatically reduce your tax burden. Reach out to the Bowers R&D Associates Research and Development Tax Credit Team today to learn more.