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Beginning Farmer Tax Credit Benefits Beginners and Landowners

August 29, 2013
Emmetsburg News

AMES - Beginning farmers are urgently needed to carry on Iowa's diverse family farm legacy but competition for land and skyrocketing land costs are making it harder for beginners to get started. The Beginning Farmer Tax Credit (BFTC), administered by the Iowa Agricultural Development Division of the Iowa Finance Authority (IADD-IFA), is one program designed to help.

Through the program, landowners who lease farmland to a beginning farmer may be eligible to receive a tax credit of up to 17 percent of their crop share lease (or 7 percent of cash rent) income for any state of Iowa income tax owed. The program also offers a tax credit for leasing depreciable machinery or equipment, breeding livestock and buildings.

Applications for the Beginning Farmer Tax Credit will be due no later than Sept. 1, 2013 for 2013 leases. Leases for 2014 will not be accepted or processed until after Jan. 1, 2014.

Practical Farmers of Iowa members are using the tax credit to help the next generation start farming. For the last four years, landowner Helen Gunderson has been renting 180 acres of her farmland near Rolfe to beginning farmer Betsy Dahl, 32, on a crop share lease.

"My siblings' farm tenants are 62 to 71 years old," Gunderson says. "If people do not start thinking about who they are going to transition their farms to, it may turn out there is nobody left. If we aren't supporting people like Betsy, there will be empty nests and empty tractor seats around Iowa." While Gunderson says she would have leased her land to Betsy without the tax credit, she adds that it's a nice perk. Last year, she was eligible for up to a $7,000 tax credit from participating in the program.

The Beginning Farmer Tax Credit program also works for farm transitions within a family. In 2012 beginning farmer Drew Lietz, 25, began renting 700 acres from his father, Dean, on their family corn and soybean farm near Alta. "We made the decision because Drew's grandfather died in his fifties of a heart attack, and I had a heart scare in December 2011," Dean says. "Better to start the transition now, rather than wait any longer."

Drew's land access arrangement is a 53 percent to 47 percent crop share lease with his father, which qualifies Dean for a 17 percent tax credit. Drew pays all repairs and maintenance costs for the equipment, operates the machinery, and does the planting, spraying and harvesting while Dean pays all the input costs. At harvest, Dean gets 53 percent of the crop while Drew keeps 47 percent.

If the landowner is eligible for a tax credit that exceeds the amount of state income tax owed, any remaining tax credits can be applied against state income tax for up to five years.

Drew says the BFTC program has provided additional incentives for his father to rent to him. "This program helps my dad save big money on taxes. Without it, Dad might be farming it himself, or cash renting to another farmer. The credit gives him a better incentive to crop share with me."

Drew told his father about the tax credit opportunity when he heard about the program from various farm organizations. "I'm glad to help spread the word to encourage more landowners to rent to beginners. The farmers in Iowa are getting older. We need young men and women to step up and farm."

Learn more about the Beginning Farmer Tax Credit program at www.iowafinanceauthority.gov, or call Steve Ferguson at (515) 725-4928.

 
 
 

 

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