Maximizing Ag Write-Offs: 2025 Tax Strategies and Planning for Farmers and Ranchers
With tax season fast approaching, farm director KC Sheperd recently sat down with Stephen Dissette of the Horter Investment Management Group to discuss essential tax preparation strategies for agricultural producers. Dissette shared his insights on navigating the tax code, avoiding common pitfalls, and taking advantage of recent legislative changes.
The Importance of Preparation and Professional Help
When it comes to taxes, Dissette’s first piece of advice is simple: do not procrastinate. Gathering accurate information is crucial, as he noted the computer expression, “garbage in equals garbage out”.
According to Dissette, the biggest mistake farmers and ranchers make is missing out on write-offs, which leads to them paying more than their fair share in taxes. To prevent this, he strongly advocates for hiring a professional CPA or tax preparer. He explained that the cost of a professional is well worth it to keep the IRS off your back and to ensure you receive the maximum write-offs available.
Key Changes from the “Big Beautiful Bill”
Dissette highlighted several positive changes stemming from recently passed tax legislation, which he referred to as the “big beautiful bill”. These updates offer substantial benefits for the agricultural sector:
- Permanent Tax Cuts: Some of the previously temporary tax cuts have now been made permanent.
- 100% Bonus Depreciation on Assets: For assets like tractors, machinery, fences, and grain bins placed in service after January 19, 2025, producers can deduct 100% of the cost in the first year.
- Bonus Depreciation on Property: A 100% bonus depreciation also applies to specific non-residential real property, such as packing houses and feed mills, placed in service after July 4, 2025.
- Permanent QBID: The 20% Qualified Business Income Deduction for pass-through income, which includes agricultural cooperatives, is now permanent, helping to lower overall tax liability.
- Income Averaging: If 2025 is a high-income year compared to the previous three years, farmers can utilize an income averaging schedule to potentially lower their tax rate.
- Pre-Paid Farm Supplies: Cash-basis farmers can deduct up to 50% of expenses for pre-paid supplies like seed, fertilizer, and feed if purchased before December 31, 2025.
- Increased SALT Limits: State and Local Tax (SALT) deduction limits have been raised from $10,000 to $40,000 for the years 2025 through 2029, though there are phase-outs for high earners.
- New Vehicle Deductions: For vehicles purchased after December 31, 2024, interest on loans for new, US-assembled cars may be deductible subject to certain limits, a move Dissette noted is intended to protect US manufacturing.
When it comes to specific deductions, Dissette advises producers to simply ask their tax preparer questions so they don’t miss out.
“Trump Accounts” and Estate Planning
Beyond immediate tax returns, Dissette touched on long-term financial planning. He mentioned newly established “Trump accounts,” where the government will seed $1,000 for babies born between now and 2028. Families and employers can contribute up to $5,000 a year into these accounts, which are invested in low-fee, high-growth equity mutual funds and tied up until the child reaches 18. Dissette noted that with consistent contributions, these accounts could potentially grow to $250,000 by the time the child turns 18.
For older generations looking to pass down the family farm, estate planning is critical. Dissette shared that estate tax limits have been raised to $15 million per person and $30 million per couple. This change is designed to help keep family farms and ranches intact and keep wealth within the family.
Build Your “Dream Team”
To navigate these complexities, Dissette recommends building a “Dream Team” of advisors, likening it to the famous 1990s basketball Dream Team featuring legends like Larry Bird, Michael Jordan, and Magic Johnson.
He stressed the importance of ensuring these advisors—such as CPAs and estate attorneys—are fiduciaries. A fiduciary is a professional who is legally bound to recommend only what is in your best interest.
“Have a plan and work your plan,” Dissette advised, warning against trying to “wing it” when it comes to financial and succession planning.
Dissette, a 6-foot-6 Navy veteran who teaches retirement classes, can be reached through his website, stephenddissetteandassociates.com. And while he may have the height of a basketball player, when asked by Sheperd if he could still dunk, he humorously replied that the only thing he dunks these days is a donut.
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