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Revised version of "Ag Income Tax Update for Farm Families" is now available

A revised version of “Ag Income Tax Update for Farm Families” is now posted on the University of Minnesota Extension Ag. Business Management website.  The revised fact sheet is posted on the Farm Tax and Legal Issues page (please see link below). www.extension.umn.edu/agriculture/business/taxation/ This revised version addresses farm tax issues that will impact producers for the 2017 income tax year.  The recently passed tax reform has a very limited effect on a producer’s 2017 tax return.  I’ve confined the discussion in this document to what matters for 2017.  I will address the components of the new tax reform legislation later in the spring.  Please feel free to contact me via email if you have any questions.  My email address is: holcombr@umn.edu I want to wish everyone a safe and prosperous new year! Thank you.
Rob Holcomb

Southwestern Minnesota Farmland Values Decline 6.1 percent in 2017

By David Bau, Extension Educator

At the end of each year for the last twenty-three years, a survey has been conducted of farm land sales in fourteen southwestern Minnesota counties.  The survey reports bare farm land sales to non-related parties for the first six months of each year. Land values had been steadily increasing until 2014.  After reaching record high prices in 2013, the upward trend was broken as prices declined in 2014.  The downward trend continued through 2017.  The summary report for this survey is available at the county extension offices in Chippewa, Cottonwood, Jackson, Lac qui Parle, Lincoln, Lyon, Martin, Murray, Nobles, Pipestone, Redwood, Rock, Watonwan and Yellow Medicine Counties.  This year the decline across the fourteen counties averaged 6.1%.  Average land values had not declined since 1996 when the average SW Minnesota land prices were $1,175 per acre in 1995 to a high in 2013 to $8,466 then declined in through 2017 to $6,340.

Data from these counties in…

Cropland Rental Rates Compared to Corn and Soybean Price Change

By David Bau, Extension Educator

In Table 1 below I compare the changes in average farmland rental rates to the annual changes in corn and soybean prices. I did to determine how closely farmland rental rates follow the changes in corn and soybean prices.

Column 1 lists the years used for comparison starting in 2000 going through 2016.  Column 2 lists the average cash corn price each year in Worthington Minnesota. Column 3 lists the average cash soybean price in Worthington. Column 4 lists the change in the average corn and bean prices from the previous year. Column 5 is the average rents paid by roughly 1200 farmers each year who participate in adult farm management programs across southern Minnesota. Column 6 uses the previous year’s average rent in column 5 multiplied by the following year’s change in corn and soybean prices to compute a projected rent and does that for each year. Column 7 starts with the average rent in 2000 in Column 5 of $98.31 and multiplies this number by next …

REVISED Producer Ag. Income Tax Webinars

November 29, 2017
The Producer Ag. Income Tax Webinar originally scheduled for November 27, 2017 has been rescheduled for Friday, December 8, 2017.
University of Minnesota Extension will be holding two, 60-minute webinars for agricultural producers.  The content of these webinars will be geared toward farm operators and managers.  Farm management instructors and agricultural professionals may also find the content useful.  This webinar will not qualify for Continuing Professional Education (CPE) or Continuing Legal Education (CLE) hours. 
The two webinars will be held on:
Friday, December 8, 2017 -- 1:00 PM to 2:00 PM CST (Rescheduled from Nov. 27)
And
Friday, December 15, 2017 – 1:00 PM to 2:00 PM CST
Tentative Topics to be covered:
1.Standard deductions/exemptions 2.Tax rates for 2017 3.Depreciation 4.Domestic production activities deduction 5.Avoiding and dealing with a net operating loss 6.Estate and gift tax issues 7.New Minnesota young farmer credits 8.Disaster payments and crop insurance 9.P…

USDA Average County Rents Published in September

By David Bau, Extension Educator

The National Agricultural Statistic Service with the USDA released the county farmland rental rate estimates for 2017.  After increasing continuously since 2007, statewide average rents went down for the third year in a row. The state average cropland rental rates declined from $185 in 2014 to $180 in 2015 to $170 in 2016 to $166 in 2017, as indicated in Chart 1 below.  This represented a 2.4% decrease from 2016 to 2017 and 5.5% decrease from 2015 to 2016 and 2.7% decrease from 2014 to 2015  Previously rental rates had a 4.5% increase from 2013 to 2014, 18% from 2012 to 2013 and 11.1% from 2011 to 2012.

Statewide Irrigated rental rates declined from $210 in 2015 to $185 in 2017 almost a 12% drop.

Pasture rent average increased from $26 per acre in 2014 to $28 per acre in 2015 to $30 in 2016 and 2017 or an increase of 7.1%.


Table 1 below lists the actual farmland rental rates by county from Adult Farm Management Records.  Since farmers and landlords are …

What is a Fair Farm Rental Agreement?

By David Bau, Extension Educator

Landlords, Farmers, Agri-Business Professionals should make plans to attend one of the informative meetings being held across Central and Southern Minnesota.  These free meetings are being provided by the University of Minnesota Extension.  Farmer profits are low or negative and farm land rental rates declined slightly while commodity prices have decreased significantly. Determining a fair profitable farm rental agreement is a challenge in today’s economy with recent record corn and soybean prices and record farm land values as recently as 2012 but commodity prices continued to decline since then.

Negotiating a fair rental agreement that satisfies the land owner and the farmer is a challenge.  David Bau and Nathan Hulinsky, Extension Educators in Ag Business Management, will provide several ways; by examples, factsheets and worksheets to determine a fair farm land rental rate for both parties.

Topics covered at the meetings will include local historic …

What Direction will 2018 Farmland Rent Go? Stay the Same? Up? or Down?

By David Bau, Extension Educator

Each year I put together tables listing actual farmland rental rates by county from Adult Farm Management Records.  Unfortunately farmers and landlords are starting to negotiate 2018 farmland rental rates and the last actual numbers available are for 2016 so I am forced to estimate figures for 2017 and 2018.  When I did this last year I used an estimate of a 10% decline and the actual figure came in at 2.5% decline statewide.  For 2017 I heard many times that rents were down, although some rents went up and some remained the same, in table 1 below I estimated a 2.5% decline in 2017 from 2016.

But what direction should 2018 farmland rental rates go?  How do I determine an estimate for 2018 farmland rental rates?

Should they stay the same? 
Landlord property taxes continue to increase. While the state legislature help with some of the school referendum costs they still increase taxes.  If rents stay the same, a landlord’s income will go down if taxes incr…

2016 ARC-CO Payments for Minnesota

By Curtis Mahnken and Bob Craven, Center for Farm Financial Management, Applied Economics

The Farm Service Agency (FSA) recently released 2016 county yields for corn, soybeans and wheat. These yields along with the marketing-year-average (MYA) prices which were released in September provide the information needed to calculate Agricultural Risk Coverage-County (ARC-CO) payments. These payments will be made in October 2017.

ARC-CO triggers a payment based on a crop’s base acres if the actual county revenue for that crop is less than 86% of the “benchmark” revenue. For corn, the MYA price (Table 1) is almost 30% lower than the benchmark price. Payments will be made in counties where the 2016 yield is up to 22% above the county benchmark yield. For wheat, payments will be triggered in counties where their yields are up to 48% above the benchmark yield.

Table 2 includes the payments per base acre by county for corn and wheat. These numbers have been adjusted to reflect the 6.8% reduction f…

New Opportunities for Minnesota Beginning Farmers and Farm Asset Owners Who Want to Help Them

By Don Nitchie, Extension Educator

Beginning in 2018, there are two new opportunities available which can be very helpful to beginning farmers in Minnesota. These programs are the Beginning Farmer Incentive Credit for existing farm asset owners who rent or sell assets to beginning farmers and the Beginning Farmer Management Credit for the beginning farmer enrolled in an approved farm business management program. These tax credits can reduce an individual’s Minnesota income tax. The programs were created by the Minnesota Legislature during the 2017 Special Session. According to MDA, current legislation funds these programs through 2023.

According to the Minnesota Department of Revenue posting of June 6, 2017, the beginning farmer incentive credit is a tax credit for owners of agricultural assets. Such assets may be land, livestock, facilities, or machinery located in Minnesota. The assets must be sold or rented to a beginning farmer who is not a family member of the asset owner, as def…

Make Time for Planning

By Betty Berning, Extension Educator

There is always a lot to do and it is easy to wonder where time goes.  In the midst of milking cows and making hay, management activities, like working on a transition plan for the farm or writing up an animal welfare policy, are frequently set aside.  That is why it is so important to MAKE time on a regular basis (ideally weekly) to work on these strategic activities.  Just like an exercise program, if you don’t make time for these items, activities that are more urgent will consume your time.  It takes discipline to commit to a regular time to work on management activities.
Management of your business is important.  By carving out time to regularly work on your business’ strategy and goals, you set the course for your farm and can proactively respond to changes.  This can help your farm to survive in the future.
One management task I suggest beginning with is a business plan.  Does your farm have a business plan?  I recommend that every farm have a …
2017 Agricultural Tax Issues Course Locations and dates for Agricultural Tax Issues Course
University of Minnesota Extension is offering an agricultural tax school in late September and early October.  This course targets income tax professionals that work with farmers.  Additionally, this course will benefit agricultural professionals such as agricultural lenders and farm management instructors. The agricultural tax school will be offered in five locations and the course has been approved for eight hours of continuing professional education.
Locations and dates for Agricultural Tax Issues Course:
St. Cloud, Minnesota Tuesday, September 26, 2017 The Tuscan Center 3333 West Division St., Suite 116 St. Cloud, MN 56301
Rochester, Minnesota Wednesday, September 27, 2017 Kahler Apache Hotel and Water Park 1517 16th St. SW Rochester, MN 55902
Marshall, Minnesota Thursday, September 28, 2017 Ramada Inn Conference Center 1500 East College Dr. Marshall, MN 56258
Crookston, Minnesota Tuesday, October 3, 2017 Crook…