Farm Asset Depreciation...Considering Sitting Out a Year

[justlookingon]

We have farmed for 11 years now filing a schedule F each year.  In 2022, we are considering taking the year off, but we may continue to farm in 2023.    How do we treat our farm depreciation for the next 2 years?  If we don't file a schedule F for 2022, can we continue to file for depreciation if we farm again in 2023? 

What if we have a little income from USDA grants (I think they go on sched F) but a much higher amount of depreciation so that we have a large loss in 2022?  

[Critter-3]

If you will continue to have income from any source then you should continue to file a Sch F even if you run at a loss from depreciation  especially if you will continue the business in a year or 2.   Otherwise you will either sell off the assets or convert them to personal use to stop the depreciation. 

[justlookingon]

So back to the tougher scenario....no income from farm in 2022......do we file the schedule F and continue to depreciate OR....if we don't file the F as we have no income and then continue to farm in 2023, can we continue on with the established depreciation schedules?

[Critter-3]

Again it depends ... if this will be just one year of dormancy and not a permanent shut down then I would keep filing the sch F but if not follow my other directions. 

[justlookingon]

Thank you!

[Rick19744]

As noted by @Critter-3 this really does "depend" (I know not really a complete sentence).

This is really a facts and circumstances situation:

• I am not aware of too many "farmers" where this is their livelihood "skip" a year of farming.
• Is this really a hobby farm where you have other income that supports you?
• Expenses are allowed, which includes depreciation,  that are ordinary and necessary for a trade or business.
• So the question becomes, do you have a trade or business.  If you don't farm, which I would equate to shutting the doors of a retail business, then how can you be doing business?
• A business is allowed to continue to depreciate assets that are idle, but once again, the business is still continuing.  It's just that some assets may not be used at the moment.

Really too many questions and missing facts to be able to provide a solid answer.  Depending on the $$ involved, you may want to schedule a one on one with a tax professional to better address the question.

[justlookingon]

First of all, we are definitely a business although we are supported by retirement income from my past job.  Farming is not our "living", but we have made some significant money while doing it.  We have filed schedule F's for over 10 years and have passed the "2 years profit in 5 years" test.  Now we are at the point of considering retiring from farming too...my wife will be 65 in the spring and I'm not far behind her.  We're just not sure if we will quit now or change our minds in a year from now.  So my question would be:  1)  If we take a year off, have no farm income, file no schedule F in 2022, can we pick up the depreciation again in 2023 if we continue to farm?  2)  A second more likely scenario would be that we don't farm, but we still receive a very nominal amount of income from USDA and mowing jobs, but because of the depreciation we have, we never make a profit.  (transition to a hobby at that point?)  I hope this paints a clearer picture for you.