Taxes: A Farmer’s Perspective

AAE 320

Goal

• Understand for a practical perspective how major types of taxes work for farmers

Taxes paid by Farmers

• Property (real estate) taxes• Sales taxes• Employment taxes• Income taxes• Self-employment taxes• Gift taxes• Death (estate) taxes

Our focus in AAE 320

Income Taxes

• IRS form 1040: Income taxes (see handout)• Page 1: List income sources– Wages/salaries– Interest/dividends (Schedule B)– Business income (Schedule C or C-EZ)– Capital Gain/Loss (Schedule D)– Farm Income/Loss (Schedule F)

• Adjustments– Deductible part of SE Tax (Schedule SE)

• Adjusted Gross Income (AGI): Bottom Page 1

Income Taxes• Page 2 Form 1040: Taxes and Credits• Itemized Deductions (Schedule A)– If choose to itemize, deduct property taxes paid

and mortgage interest on home here– Calculate Taxable Income

• Brackets in 2011 Bracket Single Married Filing Joint

10% < $8,500 < $17,000

15% $8,500-$34,500 $17,000-$69,000

25% $34,500-$83,600 $69,000-$139,350

28% $83,600-$174,400 $139,350-$212,300

33% $174,400-$379,150 $212,300-$379,150

35% >$379,150 >$379,150

Progressive Tax: pay 10% on the first $8,500 earn, then 15% on the next $26,000 earn, etc.

Other Taxes

• Self-Employment Tax: Form 1040 line 56 (Schedule SE)

• Not on Form 1040• Property taxes, Sales taxes, Employment taxes• Gift Taxes: of you give something to someone,

you may owe gift tax (Gift tax return form 709)• Estate tax: when you die, your estate may owe

taxes (Estate tax return form 706)