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?
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.
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.