Hobby farmers and the 3 5 rule : Farming Ranching Agriculture  -- General Tractor Discussion Forum and Review Hobby farmers and the 3 5 rule : Farming Ranching Agriculture -- General Tractor Discussion Forum

  parts   |   manuals   |   discussion   |   photos   |   podcast   |   reviews   |   specs   |   dealers   |   classifieds   |   contact   |   faq   |   myProfile   |   home          Login Now | Sign Up


FAQ:   What is a tractor?

Forum Index

Kubota Tractors
  Kubota News
  Kubota Price
  Kubota Review
John Deere Tractors
  John Deere News
  John Deere Price
  John Deere Review
New Holland Tractors
  New Holland Tractor Price
  New Holland Tractor Revie
Other Tractor Brands
  Articulated Tractors
  Belarus
  Bobcat Tractors
  Case
  Cub Cadet
  Hinomoto
  Kioti Tractor
  Long
  Massey Ferguson
  Mitsubishi
  Other Tractor Brands
  Other Tractor News
  Shibaura
  Yanmar Tractors
Lawn and Garden Tractors
  Craftsman
  Cub Cadet Garden
  John Deere Garden
  Kubota Lawn Garden
  Other Garden Tractors
  Simplicity
  Toro Wheelhorse
  Ventrac Lawn Tractors
Antique Tractors
  Allis Chalmers
  Case David Brown
  Farmall IHC
  Ford
  Ford 9N 2N 8N
  Fordson
  Harry Ferguson
  John Deere Older
  Massey-Harris Ferguson
  Minneapolis Moline
  Oliver Cletrac Cockshutt
  Restoration
  Tractor Pulling
Tractor Attachments Implements 3ph
  Back Hoe
  Field Mowers Brush Cutter
  Grooming Mowers Finish Mo
  Loaders
  Snowblowers / Snow Plows
  Tillers and Ploughs
  Tractor Implements
  Trenchers
  Wood Chippers 3PH
Tractor Maintenance
  Diesel Fuel Lubrication E
  Tractor Engine Repair Reb
  Tractor Tires
Utility ATV
  All Terrain Vehicles
  John Deere Gator
  Mule Utility Vehicles
General Tractor
  Farming Ranching Agricult
  Photo Contest
  Size Tractor Needed
  Tractor Projects
  Tractor Safety
  Welding
Chinese Tractors
  Jinma Farmpro Agracat
  NorTrac Tractors
  Other Chinese Tractors
Cars
  All Brands
  Audi VW
  BMW
  Car Tires and Maintenance
  Chrysler
  Exotic, Sports, Racing
  Ford Cars
  General Motors
  Honda
  Hyundai
  Mercedes
  News
  Nissan
  Subaru
  SUV and Trucks
  Toyota Cars
Trucks Trailers
  Chevy Pickup Trucks
  Dodge Pickup Trucks
  Ford Pickup Trucks
  Toyota Pickup Trucks
  Chevy Pickup Trucks
  Dodge Pickup Trucks
  Ford Pickup Trucks
  Toyota Pickup Trucks
Home Building
  Alternate Electric Energy
  Barns Pole Barns
  Buying Ranch Farm Acreage
  Carpentry
  Contractors
  Electric
  Excavation
  Moldings Finish Trim
  Other Home Building
  Pellet Stoves
  Plumbing
  Wood Stoves
Tools
  Electirc Power Tools
  Gas Power Tools
  Generators
  Shop Tools
  Techniques Howto
Landscape
  Flowers Shrubs Garden
  Golf Course Maintenance
  Irrigation Systems
  Landscape Design
  Landscape Lighting
  Landscape Maintenance
  Lawn, Turf, and Grass
  Vegetable Gardening
Construction
  Caterpillar
  Komatsu
  Wheel Loaders
Current Events Health Happiness
  Current Events
  Dogs and other Pets
  Electronics And Computers
  Food
  Health
  Just For Fun Off Topic
  Movies Music Games
  Personal Finance Investme
  Sports Outdoors
Tractorpoint Site
  Member Photos
  Site Members
  Website Operations Howto


New As Posted | Active Subjects



Click to Post a New Message!

Discussion Boards > Active Subjects > Messages as Posted > Farming Ranching Agriculture Forum

Page [ 1 ] |
Reply | Pop Up Window Reply | Add PhotoAdd Photo
 07-08-2003, 21:49 Post: 59180
CharlieR



Join Date: Jul 2003
Location: DFW, TX
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 10

2
Filter by User
 Hobby farmers and the 3 5 rule

What is the 3/5 rule all about? When I read the tax info I come across this 3/5 rule that basically states someone must make a profit 3 years out of 5 years before he/she can write off farm deductions. Not sure it applies. When I ask other people about 3/5, they tell me only income matters and that once I actually produce I can start getting deductions. I don't live on the land (not sure if that matters). I just want to grow something and sell it to offset some of the expenses, but also write off the land interest and equipment.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-08-2003, 22:28 Post: 59182
kwschumm



View my Photos

View my Photos  Pics
Join Date: Feb 2003
Location: NW Oregon
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 5764
 Hobby farmers and the 3 5 rule

We bought 15 acres of douglas firs that won't be harvested for 15-20 years. I asked our accountant about this and she told me that we could buy equipment and write it off on a depreciation schedule even though we won't make money for a long time. I hope she's right because that's what we're planning on doing! In Oregon where we grow a lot of trees that take decades to mature I can see a lot of people in this situation.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 03:40 Post: 59234
Misenplace

TP Contributor

View my Photos

View my Photos  Pics
Join Date: Jul 2003
Location: Michigan
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 875

4
Filter by User
 Hobby farmers and the 3 5 rule

I believe what you are reffering to is that you can show a loss on your equipment and investment for three years but you are expected to show a profit in five or you will likely be audited. If you are takeing right offs or deductions on buisiness expenses for those first years the govt is looseing $ on you. If it is a legitimate buisiness expense they expect you to start paying taxes on those profits or capital gains. This is too prevent "buisiness" expenses, wink, wink from occuring. Anyone takeing theese sort of deductions or planning on purchaseing or doing something along theese lines should have a long talk about your exact plans with a Certified Accountant. Most are very reasonable, In fact most are a downright bargain for what they charge compared to other professions.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 07:59 Post: 59251
lakeman



Join Date: Jul 2003
Location: Rollag Minnesota
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 39

3
Filter by User
 Hobby farmers and the 3 5 rule

The 3/5 rule is the rule of thumb that says you have to make a profit in 3 out of 5 years. If not your operation will be called a hobby and you will only be able to deduct costs up to the amount of income. If your operation is viewed as a hobby by the IRS you are required to report the income and show the deductions on schedule A as miscellaneous itemized deductions wich limits the deductions. In order to satisfy the IRS I would treat your operation as a business. Run seperate checking accounts keep tract of expenses, do financial statements and take steps to make a profit.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 10:32 Post: 59272
Misenplace

TP Contributor

View my Photos

View my Photos  Pics
Join Date: Jul 2003
Location: Michigan
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 875

4
Filter by User
 Hobby farmers and the 3 5 rule

That is of course once you are up and running. no one makes a profit in the first three years, unless they are in need of a new CPA !






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 11:15 Post: 59276
lakeman



Join Date: Jul 2003
Location: Rollag Minnesota
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 39

3
Filter by User
 Hobby farmers and the 3 5 rule

The IRS gives you an option of electing to have them look at the first two years of operation as a loss becasue you are starting up. Then you will have to show a profit in the next 3 years. I would load as many expense in the first year via the 179 deduction etc that you can. Then show profits in last 3 years. They don't say how much profit you have to show.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 13:00 Post: 59282
Misenplace

TP Contributor

View my Photos

View my Photos  Pics
Join Date: Jul 2003
Location: Michigan
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 875

4
Filter by User
 Hobby farmers and the 3 5 rule

Now were talkin ! And realisticly most buisiness do noy show an instant profit due to start up cost, lease hold improvements, Inventory, labor etc. A lot of folks have gotten in more than a bit of a bind in the last few years trying to right off home based buisinesses on primary residences, home pc's, The Tractor that is used to mow the lawn etc. It used to be reasonable to break out the % of actual buisiness use, But I wouldnt get caught with my hand in that pickle jar anymore. Personal use and buisiness use need to be totally seperate.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 15:58 Post: 59285
lakeman



Join Date: Jul 2003
Location: Rollag Minnesota
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 39

3
Filter by User
 Hobby farmers and the 3 5 rule

I agree 100%. Just use the tax laws to your advantage. Use the correct strategy. (deducting assets in first year through the 179 deduction will leave no depreciation on these assets in future years. Thats when you will show income. Don't try to cheat by deducting personal expnses its not worth it.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 19:38 Post: 59294
CharlieR



Join Date: Jul 2003
Location: DFW, TX
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 10

2
Filter by User
 Hobby farmers and the 3 5 rule

Thank you all! I have learned something and will find a CPA that knows farming. I think I'll go into the hobby farmer category but do I actually need to decide now in the first year? I think I can change at any time as long as the records are in order, though I may miss some deductions. If I can write off up to what I make that will be OK and that's what I could not find in the IRS doc 535.
Thanks again.






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
 07-10-2003, 20:23 Post: 59297
Misenplace

TP Contributor

View my Photos

View my Photos  Pics
Join Date: Jul 2003
Location: Michigan
TractorPoint Premium Member -- 5 Tractors = Very Frequent Poster
Posts: 875

4
Filter by User
 Hobby farmers and the 3 5 rule

Charlie, It really does pay to get a couple of opinions. CPA's are a bargain in my book. One thing to remember is that tax law is often vague. I have a fairly large corp and I never mix my personal tax CPA with my corp tax. My partners dont follow suit. It is critical to remember the final decesion is always yours and you give the final stamp of approval when you sign those returns. You do not want someone knocking on your door in 20 years talking fines/penalties and interest. One example I can offer is that when my wife and I met we both had homes, so double and triple everything, beds, tvs, furniture. We moved all this stuff around for several years and then started donateing it to the salvation army. I am talking like 10k worth of stuff a year. My last accountant depriciated everything untill we came up with about 25% of the purchase price for a deduction which sounded fair to me. I changed offices this past year and the new guy says, hay, claim 100% the IRS never audits this, looking more than a little peekid at that he also offered 50%, 25% or 10%. Needless to say I chose a much smaller number. It is just not worth saveing a net of only a couple dollars to walk way out in that grey area. Like I always tell my CPA, I dont mind getting audited but I damn well better not loose !






Reply to PostReply | Quote Post Reply to PostQuote Reply | Add PhotoAdd Photo




Bookmarks: Digg It | Del.icio.us |
Reply | Pop Up Window Reply | Add PhotoAdd Photo


Page [ 1 ] |

Discussion Boards > Active Subjects > Messages as Posted > Farming Ranching Agriculture Forum

Thread 59180 Filter by Poster:
CharlieR 2 | kwschumm 1 | lakeman 3 | Misenplace 4 |

 (advanced search)

Picture of the Day
EBGwd1959

Mitsubishi - Satoh Beaver 3 pt hitch connection
Satoh Beaver 3 pt hitch connection


Unanswered Questions

Shibaura SD2203 rear axle oil
Mitsubishi MX55
Gator HPX ignition module
SL 1643
Removing LHS rear wheel beari
Gear Grinding 1200A - primary
Replacing a friction diskwashe
Bolens k1502 mitsubishi K3 ove


Active Subjects

Big country 4x2 utility vehicl
Operation
lift cylinder for 3pt hitch wo
Still have jerk in hydro
Flatulent gifts human and dog
front mount snowblower
Hydraulics Won t Work
4210 ehydro codes


Hot Topics

NorTrac Tractor Quality Review
Case 446 hydraulic pump
Long 460 hydraulic problem
Jinma Tractor w transmission p
Flatulent gifts human and dog
Generator set up ideas wanted
6X4 Gator Sometimes Shudders
Roof VP75 Brush Mower Manual


Featured Suppliers

Mountain Creek Labradoodles
      MountainCreekLabradoodles.com





New Forums on Gun Sport Shooting and Hunting -- BarrelPoint.com  New Forums on Horses ManePoint.com
Talk Horses at ManePoint
Hunting + Gun Sports at BarrelPoint



Most Viewed

+ Online Used tractor price guide
+ dump truck or dump trailer
+ Do you lend your tractor
+ Just installed a Pat s Quick Hitch - Some comments
+ ever thought about moving
+ Best Manure Spreaders Review
+ TRACTOR TAX WRITE OFF
+ It s raining INSIDE my new Pole Barn
+ Hobby Farm Harvesting Equipment
+ Subsoiler in pasture

Most Discussion

+ dump truck or dump trailer
+ SW Michigan Relocation
+ Mahindra pricing versus JD Kab
+ ever thought about moving
+ Price of Goods to grower
+ Sisal and Plastic twine prices
+ Do you lend your tractor
+ TRACTOR TAX WRITE OFF
+ My 8 acres farming lot only ha
+ Clover over septic field Good

Newest Topics

+ Uber for Tractor Owners Earn from your idle machi
+ Howdy Tractorpointers
+ Contaminated Hydraulic Oil
+ drill big holes
+ Sounds that normally mean bad news
+ Correct method to check Hydraulic oil levels
+ Sprayer GPM controls
+ JD 4066 with Backhoe attachment question
+ Potato diggers
+ sand point well
















Turbochargers for Tractors and Industrial Machines
Cab Glass for Tractors and Industrial Machines

Alternators for Tractors and Industrial Machines
Radiators for Tractors and Industrial Machines

Driveline Components for Tractors and Industrial Machines
Starter Motors for Tractors and Industrial Machines