A26-Lancaater Farming, Saturday, October 3, 1998
Goal Grow and procure good quality feeds economically
Know your feed costs It is your major cost of producing milk
Jim Shirk
Agriculture Services Manager
-yiy-| The
JLjj\ Lancaster
Chambe r
t if Omimmf /rujusf f \
Phone: (717) 397-3531 ext. 62
E-mail: jshirk@lcci.com
Farming and The
Taxpayer Relief Act of
1997
As the harvest season begins
and the end ol the year draws near,
inevitably there is an end-of-year
evaluation of taxes on agriculture
operations. The following article
was developed by Steve Sutter, a
University of California Area
Farm Advisor, to answer many of
the questions about the 1997
Taxpayer Relief Act and how it
will impact fanners. Mr. Sutter
has given The Lancaster Chamber
ot Commeice & Industry
permission to reprint this article,
in its entirety, in this edition of
Lancaster Farming.
The Taxpayer Relief Act of
1997 lowers Federal income taxes
for most farmers, and allows farm
families to transfer farms across
generations more easily, according
to USDA agricultural economists
James Monke and Ron Durst.
Most provisions of the new law
become effective m 1998.
An estimated 6% of farm
estates currently owe Federal
estate and gift taxes compared
with just over 1% of all estates.
The Act gradually increases the
unified estate and gift tax credit to
shield $1 million from estate
taxes by 2006. However, due to
the relatively slow phase-in
through 2003, most of the
benefits will be realized m 2004
and beyond. This, and other
provisions of the Act should
reduce, it not eliminate, the need
to sell farm assets to pay Fedeial
estate taxes. especially for
continuing businesses
Lower capital gams tax rates
provide the greatest income tax
•.avmgs for farmers nearly $725
million of the estimated $1.6
billion annual savings tor the
U S farming industry The rate
declines from 28% to 20% for
individuals in most tax brackets
(from 15% to 10% tor taxpayers
in the 15-percent bracket), with
lower rates available in the future
for assets held at least 5 years.
Couples can exclude up to
$500,000 of the gain on the sale
of their principal residence. This
new exclusion can be used as
DAIRY FARM
MANAGEMENT
BASICS
A Farm Management Course by
Glenn A. Shirk
Penn State Extension Agent
Lancaster County, Pennsylvania
frequently as every 2 years.
The new law also expands
retirement savings incentives.
Currently, only about 9% of
farmers annually contribute to an
individual retirement account
(IRA). Although the 1997 Act
creates a new, nondeductible
"Roth IRA," deductible IRAs are
usually preferred if marginal tax
rates are expected to fall
substantially in retirement.
Farmers who pay their own
health insurance premiums will
benefit from expanded self
employed health insurance
deductions. This year, farmers and
other self-employed taxpayers are
allowed a deduction of 45% of
health insurance premiums; the
percentage deduction gradually
increases to 100% by tax year
2007 and thereafter.
The Act restores farmers'
ability to use deferred payment
contracts without being subject to
the alternative minimum tax
(AMT). Deferred payment
contracts allow farmers to deliver
farm commodities for sale at a
specified price, with payment
deferred until the following year.
The Act also repeals the AMT for
small corporations (most farm
corporations) beginning in 1988.
The Act increases tax benefits
for most taxpayers for having
dependent children by providing a
$5OO ($4OO for 1998) tax credit
tor each qualifying child under the
age of 17 An additional
refundable credit is allowed for
taxpayers with 3 or more children
The new child tax credit is
expected to benefit about one-third
of all farmers and their families
Farmers and them advisers can
request the free IRS Publication
225 "Farmer's Tax Guide" each
year (December) on 1-800-829-
3676 For more specific
information be sure to discuss
your options with your account or
financial advisors.
Feel free to send your
comments and ideas to Jim Shirk
at The Lancaster Chamber of
Commerce & Industry, PO Box
1558, Lancaster, PA 17608-
1558, by email at
jshirk@lcci.com or call him at
(717) 397-3531.
Article 17
1 Explore your production options and costs The worksheet that was illustrated in Article 7 can serve
as a guide for helping to determine your costs of producing feed per acre, cost per ton, or cost per
bushel. Some production and harvesting options are listed below.
2 Consider how many cows the land will support when pasturing, or when growing forages only, or
when growing torages and gram. As you evaluate stocking intensity, also consider the amount of
land that is needed to dispose of manure in a responsible manner, and when it will be available to
receive manure applications throughout the year
What feeds do cows need and how can their needs be met at least cost 9
1 Let the cows' needs, the cost of home-grown feeds and the cost ot purchased feeds, play a major
part in dictating the ration to be fed and the crops to be grown Let the cows dictate the cropping
program that is most desirable, rather than the cropping program dictating the feeding program
2 Sometimes the above guideline may have to be bent because of machinery, equipment, feed
storage facilities and feed handling systems that are already m place
Buy wisely
1 Shop tor good prices
2 Many times it is beneficial to invest in economical storage facilities, and to borrow money in
order to purchase feeds m bulk at discount rates, or at times when the market is weak, such as at
harvest time
1 Consider various commodities as an economical source of good quality ration ingredients
4 It you buy teed ingredients, be sure you are getting the quality you are payma tor - - and want
As the buver you are in charge ot quality control and you assume more ol the nsks
5 Feed puces should be adjusted for variations in moisture and quality The value ot feeds also
va,y depending upon where they arc priced, for example on the stalk in the field, in the windrow
stored in the growers facilities, at the market place, or delivered to the farm
MARTIN’S TIRE & ALIGNMENT
Own or rent land, own your own machinery and grow your own crops
Own or rent land, but custom hire someone to do some or all of the field work and harvesting
Rent your land out m return for some of the crops, or buy back the crops
Own or rent land, buy less machinery, and graze the land vs harvesting it
Own or rent land and produce all your own forages and grams
Own or rent land and produce most of your forage and buy most of your gram
ate?
mdard.
OPEN-SIDED
CALF
FACILITY
instruction.
MIMBtR
tars
17) 354-4271