NOTE: This headliner is current through the publication date. Since changes may have occurred, no guarantees are made concerning the technical accuracy after the publication date.
Headliner Volume 250
November 12, 2008
Certain provisions of the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-234, generally called the Farm Bill, contain key tax provisions affecting farmers and ranchers. The date of enactment of this bill is May 22, 2008.
Tax Relief for Retired and Disabled Farmers
Retired and disabled farmers participate in conservation programs under the Conservation Reserve Program. The CRP provides payments to landowners who engage in certain conservation practices.
Section 15301(a) of the Farm Bill amends Internal Revenue Code Section 1402(a) (1) to provide that individuals who receive retirement or disability benefits under section 202 or 223 of the Social Security Act are not subject to self employment tax on CRP payments. This provision applies to CRP payments made after December 31, 2007.
Limitation on Excess Farm Losses
Section 15351(a) of the Farm Bill, added Internal Revenue Code Section 461(j) which places a limitation on excess farm losses for certain taxpayers.
For tax years beginning after December 31, 2009, the bill limits farming losses if a taxpayer, other than a C corporation, receives any applicable subsidy for any taxable year, excess farm losses of the taxpayer for the taxable year are disallowed against non-farm income. The threshold amount is the greater of $300,000 or, $150,000 for married taxpayers filing separately or the net farm income for the previous five years. The term applicable subsidy includes any direct or counter-cyclical payments or any Commodity Credit Corporation loan.
For partnerships and S corporations, the limitation is applied at the partner or shareholder level. This limitation is applied before the passive activity loss rules of Internal Revenue Code Section 469.
This provision is effective for taxable years beginning after December 31, 2009.
Modification of the Optional Method of Computing Net Earnings from Self-Employment
Section 15352 of the Farm Bill amended Internal Revenue Code Section 1402(a) (17) providing for modification of the optional method of computing net earnings from self-employment.
For many years, a farmer on the cash or accrual methods of accounting has been allowed to compute net earnings from self-employment in the regular manner or to use an optional method based on gross income to compute net earnings from self-employment for social security purposes.
Prior to amendment of IRC Section 1402(a) (17) if gross income is $2,400 or less, a farmer could report two-thirds of gross income as self-employment income. If gross income is more than $2,400 and net earnings from self-employment are less than $1,600, a farmer could report $1,600 as self-employment income.
Under the 2008 Farm Bill legislation, the “$2,400” amount is replaced by “upper limit”, which is an amount equal to 150 percent of the “lower limit.” The “$1,600” amount is replaced by “lower limit” which is the sum of the amounts required under Section 213(d) of the Social Security Act for a quarter of coverage. For 2008, that figure is $1,050 and for 2009, it increases to $1,090.
This provision is effective for taxable years beginning after December 31, 2007.
Rate the Small Business and Self-Employed Web Site
|