September 1997
Prairie Shortcuts
Library
Home
E-Mail
Back
Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
So many provisions of the federal budget/tax relief bill passed recently by Congress relate to agriculture, you'd think it was a farm bill. In fact, this package, loaded with items long-sought by wheat and barley growers, may offer more for farmers than your average farm bill:
Capital gains tax relief - Top rate will be cut from 28% to 20%, effective for sales made after May 6, 1997. There's an 18% rate for assets purchased after 20a00 and held at least five years. There's a new 10% capital-gains rate for joint filers in the 15% tax bracket (with income less than $41,200) and the holding period for investments to qualify for capital gains treatment lengthens to 18 months (from 12 months) effective July 29, 1997. There's a $500,000 exclusion of gains for homes sold by couples, or $250,000 for a single individual. Livestock producers forced to liquidate herds due to disaster won't be faced with a cap tax if they use the proceeds to rebuild herds later. The cap tax would still apply to regular livestock sales.
Estate and gift tax relief - The bill gives a $1.3 million total estate-tax exemption ($2.6 million for couples) for family farms effective in 1998.
Farmers exempt from AMT - The budget bill eliminates the alternative minimum tax applied to deferred payment contracts or installment sales for accounting. Small businesses with $5 million or less in gross receipts, including farms operating under the corporate structure, will also be exempt from the AMT.
Farmers get income averaging - Language establishes a 3-year income averaging program. It appears for the 1998-2000 tax years only, using the three prior taxable years.
Faster phase-in of health insurance deductions - Health insurance deductions for self-employed individuals (including farmers) will gradually increase from the current level of 40% of the premium cost to 50% in 2000 and 2001; 60% in 2002; 80% in 2003, 2004 and 2005; 90% in 2006; and 100% thereafter.
The budget bill also expands income limits and deductibility of IRAs for qualified individuals. Details on some provisions may be subject to change, as technicalities of the final bill are sorted out. Be sure to keep in touch with your financial/tax advisor.
GET HELP WHEN PLANNING FARMLAND DRAINAGE
Good sources for assistance include the local Natural Resource Conservation Service (NRCS), Farm Service Agency (FSA), Soil and Water Conservation District (SWCD), and watershed offices. "People in these offices can help with interpreting current wetlands restrictions and getting the pre-approvals necessary for some drainage work," says Jerry Wright, U of M extension engineer. Be sure to carefully analyze the potential yield payoff before starting a drainage investment. "Never assume that improving the most poorly drained land in a field will bring its yield up to the level of the best soil types in the field," he says.
An article entitled "Minnesota Farmland Drainage: Profitability and Concerns" provides a more detailed look at the economics of farmland drainage. The article is in the spring 1997 issue of the "Minnesota Agricultural Economist" newsletter. The author is Vernon Eidman, U of M professor of applied economics. A free copy is available from the Waite Library, Department of Applied Economics, University of Minnesota, St. Paul, MN 55108-6040; phone (612) 625-1705. The e-mail address is lletnes@dept.agecon.umn.edu.n
CHANGES TO SWAMPBUSTER
The 1996 Farm Bill made several changes to wetland conservations provisions (Swampbuster), including more flexibility in mitigating or offsetting wetlands losses. Growers who plan to do wetlands work this fall are urged to read up on the changes through fact sheets available at Farm Service Agency offices.n