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Financial question - writing off expenses

Discussion in 'Homesteading Questions' started by Melancholy Bear, Jan 19, 2020.

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  1. Jan 19, 2020 #1

    Melancholy Bear

    Melancholy Bear

    Melancholy Bear

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    Has anyone starting a homestead created a farm business LLC in order to write off expenses, and pass through a loss to your personal income taxes? Is this a reasonable approach or is there a better way?
     
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  2. Jan 19, 2020 #2

    Curmudgeon

    Curmudgeon

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    Doing an LLC is a good idea, 1) it secures the name 2) it separates your personal assets from business assets.

    If you are actually starting a 'business' I recommend the LLC and take complete advantage of the write offs.

    My business was an LLC for the whole time I ran it.
     
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  3. Jan 19, 2020 #3

    SheepDog

    SheepDog

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    The best practice is to pay a CPA (Certified Public Accountant) to make sure you can write off the expenses for a business.
    The "rule of thumb" is that any purely business expense can be a write off BUT you have to be able to show that it is a business expense and document the expenditure.
    If you are farming and you need a new tractor that is an obvious business expense BUT The tractors value depreciates each year and unless you are paying on a loan the price is rarely fully covered. With a loan you write off the payments over the life of the loan and of course your interest is part of those payments. You end up getting as much credit for tax purposes as you pay out. Without the loan you end up getting about half of what you pay for the tractor. As an LLC you will be an employee of the business. The business can write of your salary but you have to pay income taxes on it.
     
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  4. Jan 19, 2020 #4

    Cascadian

    Cascadian

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    We have a Cpa because I don't want to spend my energy on it. I give her receipts, documents and the description of the expenses. She figures out what is what. We think it is money well spent.
     
    Last edited: Jan 20, 2020
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  5. Jan 19, 2020 #5

    SheepDog

    SheepDog

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    I agree! A CPA and a good real estate lawyer are worth the money spent.
     
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  6. Jan 27, 2020 #6

    LadyLocust

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    I was told you have to show an income. If you are homesteading for only your personal living, will it generate an income? I was also told that you could only claim a loss for 3 years as a valid business. I think some of this varies by state- definitely CPA questions.
     
    Meerkat likes this.

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