Farm Records and Taxes

Gary Bretthauer, Unit Assistant, Crops/IPM, Kendall County Extension Unit, Yorkville, 630-553-5823. bretthau@uiuc.edu

While President Bush continues to call for a general tax cut, there have been few if any specifics concerning what form such a tax cut might take. The effective date of any tax cut is undecided. An across-the-board rate cut could be accomplished in several ways. However, the form of the tax cut could benefit some taxpayers more than others. For example, the personal exemption or standard deduction could be increased. This would result in a larger tax cut, percentage wise, for lower income taxpayers. The actual tax rates could be lowered, but tax benefits would depend on specific reductions in each tax bracket. A new tax bracket between the 15 percent bracket and the 28 percent bracket would benefit many middle income tax payers. A change in depreciation rules could benefit many businesses, including farming. With the financial condition of the so-called social security trust fund, it seems unlikely that any tax cut would involve social security taxes. Even with the support of Alan Greenspan, a tax cut may not materialize at all. The so-called budget surplus is based on long range projections. The weakening economy may wipe out any surplus before any tax cut is passed. Those involved in agriculture are all too familiar with long range projections.

Regardless of specifics, a farmer will need accurate and up-to-date records to make the best use of any tax rate reduction. Whether records are kept in a spiral notebook, a farm record book such as U of I’s Farm Record Book, or some type of computer program, it will be important to know "the current state of farm income" to take advantage of any tax reduction Washington passes. If record keeping has been neglected during the winter months, there is no time like the present to get caught up.