Agricultural producers have until March 1, 2017, to file their 2016 income tax returns without penalty if they have not made estimates.
“Producers have until April 18 to file without penalty if they have paid their estimated tax by Jan. 17,” says Ron Haugen, North Dakota State University Extension Service farm economist.
Items to note for 2016 income tax preparation:
- The 179 expense election is $500,000. Generally, the 179 expense election allows producers to deduct up to $500,000 of machinery or equipment purchases for the year of the purchase. There is a dollar-for-dollar phase-out for purchases of more than $2,010,000.
- The additional 50 percent first-year bonus depreciation provision is in effect for 2016. It is equal to 50 percent of the adjusted basis after 179 expensing. It only applies to new property that has a recovery period of 20 years or less. This provision is scheduled to be phased out.
- The standard deduction is $12,600 for those who are married and filing jointly. The deduction is $6,300 for singles.
- The personal exemption amount is $4,050.
- Long-term capital gains and qualified dividend income is taxed at a 0 percent rate for individuals in the 10 or 15 percent tax brackets,15 percent for those in the 25 to 35 percent brackets and 20 percent for those in the top income bracket.
- The annual individual retirement account contribution is $5,500 for 2016 or $6,500 for individuals 50 or older.
- The annual gift tax exclusion for 2016 remains at $14,000.
- The 2016 Social Security wage base is $118,500.
- The business mileage rate for 2016 is 54 cents per mile.
- Crop insurance proceeds, if received in 2016, may be deferred to 2017 if you qualify. You must use cash accounting and show that, under normal business practices, the sale of damaged crops would occur in a future tax year.
- A livestock deferral can be made by those who had a forced sale of livestock because of a weather-related disaster.
- Remember that qualifying farmers can elect to compute their current tax liability by averaging, during a three-year period, all or part of the current year’s elected farm income. This is done on Schedule J. North Dakota farmers who elect to use income averaging for federal purposes also may use Form ND-1FA, which is income averaging for North Dakota income tax calculations.
- Some producers may have generated a net operating loss (NOL) for 2016. Agricultural producers can carry a loss back five years for a refund. They may elect to carry the loss back only two years or elect to carry the loss forward up to 20 years. Note that self-employment tax is not refundable.
Information on agricultural tax topics can be found in the “Farmers Tax Guide,” publication 225. It is available at any IRS office or can be ordered by calling 800-829-3676. Any questions about these topics or further updates should be addressed to your tax professional or the IRS at 800-829-1040 or http://www.irs.gov. Call the North Dakota Tax Department at 877-328-7088 or go to http://www.nd.gov/tax/ for answers to North Dakota income tax questions.