Tax deduction program for farmers set to launch

The Missouri Agricultural and Small Business Development Authority will start accepting applications next month for a new program in support of beginning farmers in the state.

According to a news release, a farm owner may qualify for a deduction from their Missouri adjusted gross income based on the income received by either selling, renting or leasing farmland to a beginning farmer. The application period starts Aug. 1.

“This program is the perfect complement to our existing beginning farmer loan program,” said Jill Wood, executive director of MASBDA, in the release. “Our beginning farmer loan program enables local lenders to provide lower interest rates on loans to beginning farmers purchasing farmland. While the two programs operate independently of each other, both are beneficial to landowners and beginning farmers.”

A farm owner who sold farmland to a beginning farmer on or after Aug. 28, 2023, may subtract from their Missouri adjusted gross income, to the extent included in federal adjusted gross income, an amount equal to the portion of capital gains received from the sale of the farmland. If the capital gain amount is $2 million or less, 100% may be subtracted, according to the release. The percentage of capital gains that can be subtracted decreases for amounts over $2 million-$6 million, ranging 20%-80%.

Additionally, a farm owner who rents, leases or enters into a crop-share arrangement with a qualified beginning farmer also may qualify for a deduction to their Missouri adjusted gross income. The arrangement may not exceed 10 years. The deduction is equal to the amount of annual income received by the farm owner under the agreement, to the extent included in federal adjusted gross income, up to $25,000 per tax year.

After MASBDA verifies that the farm owner and beginning farmer meet program requirements, a dated certification letter will be provided to the farm owner. Certification letter copies also will be provided to the beginning farmer and Missouri Department of Revenue.

To receive the deduction, the farm owner must provide the certification to the state DOR when filing their tax return, using Form MO-5955, according to the release. For transactions that took place in the 2023 tax year, the farm owner may have to file an amended return to utilize the deduction.

Program information and applications are available on the state agency’s website.

The Show Me State is home to nearly 88,000 farms, ranking it second nationally, according to the Missouri Department of Agriculture. The agriculture industry employs nearly 460,000 people across the state and has an estimated economic impact of $93.7 billion.