1. 2008 Farm Bill Tax Law Changes & Other 2009 Revisions Tax rules that apply to farmers and ranchers. J C. Hobbs Assistant Extension Specialist OSU Dept of Ag Economics

2. 2008 Farm Bill Tax Law Changes Conservation Reserve Program (CRP) payments Preferential treatment for donation of conservation easements Endangered species recovery expenses Depreciation for racehorses

3. 2008 Farm Bill Tax Law Changes Limits on deduction of farm losses Farm optional method paying for Self- Employment Tax Commodity Credit Corporation (CCC) information reporting (1099-G)

4. Conservation Reserve Program Payments CRP payments received after 2007 not subject to Self-Employment Tax for farmers who are retired or receiving disability benefits. If not retired or disabled, must look at each situation to determine if SE Tax must be paid.

5. Conservation Easements 2-year extension of charitable contribution deduction for cap gain property donated for qualified conservation purposes. For qualified farmer or rancher; the amount of the deduction generally will equal the FMV of the property on the date of the contribution Property must be donated during 2008 and 2009 tax years

6. Endangered Species Recovery Expenses After 2008, expenses incurred or paid for management practices under the Endangered Species Act of ’73 can be deducted in the year incurred versus capitalized over useful life.

7. Racehorses Racehorses that are placed in service after 2008 and before 2014 are given a 3-year depreciable life no matter the age.

8. Limits in Deductible Farm Losses After 2009, losses in a year when Direct or Counter Cyclical payments or any CCC loans are received the loss is limited to the greater of $300,000 or total net farm income for the previous 5 years. Farm income = all income or loss from farming businesses. Disallowed loss is carried forward and deducted. Excludes loss from fire, storm, drought, or disease which are casualty losses and deductable in a different manner.

9. New Threshold for Farm Optional Method for Self- Employment Tax Tax years after 12/31/07, farmers can elect to get 4 quarters of coverage for Social Security retirement, disability, and retirement benefits. This provides farmers or the family to acquire the needed quarters of coverage to obtain greater disability or survivor benefits. A quarter of coverage for $1,050 of wages and now indexed for the future.

10. Information Reporting on CCC Transactions New rule effective for farmers that repay CCC loans after Jan. 1, 2007, they will be issued 1099-G’s for the IRS 1099 matching program to insure proper reporting.

11. 2009 Capital Gain Rates Capital Gain is the amount of the sale price in excess of basis. 0% capital gain rate for individual in the 10% and 15% tax brackets for 2008 through 2010 15% capital gain tax rate for individuals in the 25%, 28%, 33%, and 35% tax brackets.

12. Section 179 Expensing Assts with fixed life: 5, 7,10,15, or 20 years. New rules for tax years beginning in 2009, the section 179 expense deduction is $133,000 subject to an investment limit > $530,000 of property placed in service. Must not create a loss. Purchased capital assets that must be depreciable.

13. Contact Information J C. Hobbs 580-237-7677 or jc.hobbs@okstate.edu