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Farm and Finance

Understanding the benefits of health reimbursement arrangements

It’s no secret that a spotlight has been on our country’s healthcare system for some time now — and a bright one at that. Health insurance options and expenditures are a real concern for agribusiness owners and it’s hard to know what options will best fit the needs of your operation. Rest assured there are options; some that can even put money back your pocket.

Health Reimbursement Arrangements (HRAs) are based upon Section 105 of the Internal Revenue Code. These particular arraignments allow farmers who qualify to deduct 100% of family medical cost against the farm income. In turn, the taxpayer saves federal, state and FICA taxes for family medical costs (typically a 35% savings).

This is done by declaring medical expenses as business expenses, not as Schedule A itemized personal deductions, which are often limited or lost. What’s the catch here you ask? Whether they file as sole proprietor or an LLC, farmers must have a spouse who is employed by their business, at least on a part-time basis.… Continue reading

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To lease or to buy?

Equipment is the lifeblood of any farming operation. Luckily, there are many different ways for farmers to obtain the machinery they need, with an operating lease and purchasing being two of the most popular options. But which option is right for you? There are pros and cons associated with each route and here we take a look at just a few of them.

 

Pros for operating leases

Less cost. You can acquire the equipment you need with little to no initial investment. Once the lease begins, your payments will most likely be lower than they would be if you were purchasing the equipment. These are positive things if cash flow is a current concern.

Balance sheet bonus: an operating equipment lease does not show up on your balance sheet and consequent leases do not impact your balance sheet ratio.

Flexibility: you enter into the lease, typically for three to five years, and when it ends, you can upgrade and have access to the most current technology.… Continue reading

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A good accountant: A more important resource than you think

As everyone involved in agribusiness knows, this industry is ever-changing. Whether you are a farmer or a supplier, the cyclical ups and downs of this business are unavoidable. It’s important to know how to adapt to changes in the economy, markets, customers, competition, technology, regulations, taxes…the list goes on and on. Adapting is easier to do when you partner with the right people, a good accountant being one of them.

An accounting professional with extensive experiences in the agribusiness space will end up being a pleasant surprise and a trusted advisor to your business. That trust will grow as you watch them handle not only the tasks you would expect, such as your taxes, but also as they guide you towards making sound decisions that will help your operation reach the next level.

For example, an accountant can help you in regards to growth, expansion, and even best industry practices. One Holbrook & Manter client explains this a bit further sharing, “we might be thinking about buying another farm and trying to understand the financial ramifications so we’ll get a hold of Holbrook & Manter and have a what if discussion.… Continue reading

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Buy high, sell low…. Really?

Buy low, sell high. That is always the ideal scenario. Traditionally that is what your investment advisors and accountants tell you. But, if you’re dealing with grain, things operate a little differently. In fact, in the case of grain elevators, ethanol plants, feed grinders, and more it’s not all about the purchase price. Rather, it’s about managing basis.

Many agribusiness professionals are familiar with basis. It’s what we refer to as the difference between the quoted market price on the Chicago Mercantile Exchange (Chicago) and the local market price. In taking a closer look at grain, it’s rare that you will sell grain at your local elevator for the same price quoted in Chicago. Often you will be paid less, but, possibly more. It all depends on local supply and demand. The whole process can cause some head scratching — how is it that you can buy high, sell low, and still make money?… Continue reading

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The ACA investment tax: How will it affect you?

A new tax as a part of the Affordable Care Act may mean you will owe more in taxes, and with tax season in full swing, now is the time to figure out just how much more you could be made to pay.

The Health Care and Education Reconciliation Act has presented us the Net Investment Income Tax, referred to by many as NIIT or the super Medicare tax. This tax exposes the net investment income of individuals, estates and trusts to a 3.8% tax when their modified adjusted gross income exceeds certain threshold levels.

These levels are: $250,000 for married individuals filing a joint return, $125,000 per each for married individuals filing separate returns and $200,000 for unmarried individuals and other cases. Trusts and estates have a much lower threshold for when this tax applies. This new tax is creeping up on many and there could be unpleasant consequences for those that don’t comply.… Continue reading

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Farm and finance for 2015

It’s no secret that there are many fiscal concerns of an agricultural professional. With 2015 in full-swing, there are certain areas that deserve attention from you and your trusted financial professional. All of this information might seem a bit daunting, but it doesn’t have to be. Working with an experienced CPA is really a breath of fresh air. They can guide you through all the challenges and financial victories that these topics can bring. Here are a few important topics to consider to help ensure a successful year.

Tangible Property Regulations

Tangible Property Regulations (TPRs) should be at the top the list of regulations to review. Treasury personnel have indicated that the IRS expects all taxpayers with tangible real and/or personal property to file one or more Form(s) 3115 in their 2014 tax year to properly comply with new rules. This applies even if there is no adjustment necessary to properly reflect the change in method in your taxable income.… Continue reading

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