How to Use a Small Farm for Tax Write Offs

Turning a hobby farm into a legitimate business has tax benefits.

If you own rural property and have a love for farm activities, you can benefit by turning a hobby farm into a business. For example, you can deduct the expenses from your yearly income tax report and see sizable returns as a result. Most farmers understand that even large farms have trouble showing a profit, so the smaller your farm the more likely your expenses will outweigh any income you receive.

Instructions

1. Check the local zoning laws for your property. If you live in a rural area, it is likely that your property is zoned for agricultural use even if it is not referred to as a farm on a property report. Often small acreages are called "rural estates" but have agricultural zoning, meaning they are able to conduct any business that is related to agriculture.

2. Operate as a business. The ability to write off expenses of a small farm requires this. This means you need to make an effort to make money from your property.

3. Keep all receipts. These include obvious expenses such as livestock feed and seeds for planting, but also peripheral expenses such as building supplies, maintenance and office supplies used to conduct business. Receipts for the purchase of any machinery used in the operation of your farm should be saved, although your accountant will explain which items will be deducted as a total expense, and which will be deducted over a certain span of years. Big items expected to have a long-term durability such as buildings, animals or heavy equipment are considered depreciable write-offs.

4. Keep track of mileage. If your small farm business includes traveling to livestock shows, garden clubs, shows or expositions, or even if you attend classes or seminars to further your business abilities, keep track of the distance to and from such events. You can write off the mileage, but not the gasoline expenses. It will be converted to a certain amount per mile by your accountant. Keep all toll receipts or receipts from filling automatic toll machines.

5. Have a business plan that shows your plan of action and what you expect to gain over a certain number of years as well as how you are going to go about such activities. You will not need this just to file your taxes, however. If you are audited, it is proof that you have a concrete goal in mind for your small farm.