In Florida, land used for agricultural purposes including farming, bee harvesting, livestock-breeding, and citrus growing is typically taxed at a much lower rate than land used for residential or commercial purposes. The Internal Revenue Service (IRS) offers farmers and ranchers a number of opportunities for tax breaks, deductions, and write-offs, many of which prospective buyers of Florida ranch land for sale are unaware of including deductions for business expenses, conservation and capital expenses, and operational depreciation and losses.
As of 2011, the IRS allows ranch owners to deduct ordinary and necessary ranch operating expenses as a business expense. An expense that is commonly accepted in the ranching industry. A necessary expense is defined as an expense that is essential to provide for the rancher’s production of income. These expenses can include breeding and veterinarian fees, livestock feed, paid interest, and labor expenses such as employee wages and benefits that are associated with the ranching operation.
Conservation & Capital Expenses
There are certain tax deductions for Florida ranch land owners that the IRS allows for conservation and capital expenses. Conservation expenses include costs related to privately owned land that has been used for the ranching operation such as costs associated with grading land or restoring soil fertility, construction or improvements of dams, ditches, ponds, and drainage. However, this does not include land filling or drainage of wetlands. Capital expenses are costs associated with the acquisition, improvement, or restoration of an asset that is to be used for the ranching operation and expected to last more than one year.
Depreciation & Losses
The IRS allows ranch owners to deduct depreciation of certain assets including depreciation of structures and buildings, machinery, equipment, and vehicles used for the operation of the ranch. In addition to depreciation, the IRS also allows ranch owners to deduct operation expenses that exceed the ranches’ income. The IRS classifies operational losses as at-risk or passive activities, with each activity having its own set of rules and limitations for deductions.
In addition to the tax advantages, owning ranch land for sale in Florida can be a rewarding experience filled with pride of ownership, diversity, and endless opportunity.
***This information is for educational purposes only, and is not intended to substitute the advice of a qualified tax professional or representative of the IRS. It is important to keep in mind that the deductions and write-offs available to ranch owners are constantly changing. If you have any questions regarding these rules or regulations, please contact the IRS for assistance.