Farming
Farm tax preparation and planning, lender-ready financial statements, and succession advice for family farms and agricultural operations of every size.
Overview
Farm taxation has its own vocabulary and its own rules. Farm income is generally reported on Schedule F for individual farmers, farmers may elect to average farm income over prior years, and many farms can choose between cash and accrual accounting depending on their structure and size. Equipment, grain bins, and farm buildings each carry depreciation choices that affect taxable income for years. Pease Bell, a Top 200 U.S. CPA firm based in Cleveland, Ohio, helps farm families and agricultural operations make these decisions deliberately rather than at the last minute.
Beyond the annual return, we help farms produce financial statements their lenders can use, review whether the current entity structure still fits, and plan for the transfer of the operation and its land to the next generation. Because audit, tax, and advisory sit under one roof, the same team that prepares your return understands your balance sheet and your long-term plans.
How We Help Farms
Schedule F and Farm Returns
Preparation of individual, partnership, and corporate returns for farm operations, including Schedule F reporting, crop insurance and government payment treatment, and coordination of related entities such as land-holding companies.
Farm Income Averaging
Analysis of whether electing farm income averaging can spread a high-income year across prior years’ tax brackets, and modeling the effect alongside other timing tools such as deferring or accelerating sales.
Equipment and Building Depreciation
Depreciation planning for machinery, vehicles, grain storage, and farm structures, including Section 179 and bonus depreciation choices, so purchases are timed and recorded with both this year and future years in mind.
Accounting Method Review
Evaluation of whether your farm is eligible for cash-method accounting or must use accrual, and whether a change in structure, growth, or ownership has altered that answer since the method was first chosen.
Lender Financial Statements
Compiled, reviewed, or audited financial statements and supporting schedules that agricultural lenders and banks can rely on, including accrual-adjusted income figures that show how the operation actually performed during the year.
Succession and Estate Planning
Planning, coordinated with your attorney, for transferring the operation and land to family members or other buyers, including entity structure, gifting strategy, and estate tax considerations specific to farm property.
Challenges We Help Farms Address
- ✓Volatile commodity prices and yields that swing taxable income from year to year
- ✓Deciding when to buy equipment and how aggressively to depreciate it
- ✓Confirming cash-method eligibility as the operation grows or changes structure
- ✓Producing lender financials that reflect true accrual performance, not just cash flow
- ✓Planning the transfer of land and operations to the next generation
Frequently Asked Questions
What is farm income averaging?
Farm income averaging is an election under IRC Section 1301 that lets individuals with farming income spread some of that income over the prior three tax years for purposes of computing tax. It can reduce the effect of a single high-income year falling into a higher bracket. Whether it helps depends on your income history, so it should be modeled each year.
Can my farm use the cash method of accounting?
Many farms can, but not all. Individuals and many family-owned farm entities are generally permitted to use the cash method, while certain farming corporations and partnerships with corporate partners may be required to use accrual unless they meet a gross receipts exception. Eligibility should be rechecked when ownership, structure, or revenue changes significantly.
How should I depreciate farm equipment and buildings?
It depends on your income outlook and financing plans. Farm machinery, single-purpose agricultural structures, and general-purpose farm buildings fall into different recovery periods, and you may be able to expense part or all of a purchase through Section 179 or bonus depreciation. Expensing everything now is not always best, since it can leave little to deduct in later high-income years.
How do I plan succession for a family farm?
Start early and involve your attorney, CPA, and family. A farm succession plan usually addresses who will own the land, who will run the operation, how non-farming heirs are treated, and how to manage estate and gift taxes. Tools may include entity restructuring, gradual transfers of ownership, buy-sell agreements, and special-use valuation for qualifying farm real estate.
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