By Brian E. Ravencraft
As we all know too well, farming incomes can fluctuate from year to year depending on yields, market conditions, and of course the Ohio weather. In certain years a farmer could have large profits subject to higher tax rates, while in the following year have a loss or little profit that results in a minimal tax liability. Due to the uncertain variables that affect farming, farmers should consider using farm income averaging.
What is farm Income Averaging (FIA)?
Farm income averaging (FIA) is a tax management tool that can be elected after the end of the tax year. In simple terms, farm income averaging allows you to spread a certain amount of your farm income over three years. If you are in a higher tax bracket in the current year and the three preceding years in a lower tax bracket, you will be able to reduce this year’s federal tax liability.… Continue reading
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