Farm Land Questions on whether is ok to deduct expenses, mortgage interest and tax on the farm land newly purchased but not generating income yet. See the details below. Thank you!

[autumn_river_200]

Bought a 25 acres farm land in MD at the middle of 2013 and planning to use it as a orchard farm. Both of me and my husband have jobs in other field, but we did spent lots of time and expenses on the land/farm. We spent about 10k on the fruit trees and seeds, we also spent another 10k on the well and machinery and fertilizer last year. Our question is since we don't get any income from the land yet, can we claim the expenses on the cost we spend on the seeds and fruit trees and other supplies for the farm? Also is Mortgage interest on the land deductible? How about property tax? The land does not have a house yet, it is just a farm land. We did build a green house there, not sure whether the cost of green house can be deducted? Also, the TurboTax is not working properly whil I do the farming section, once I input a farm name, the info can not be found, but the expenses I input is showing in the 2013 column, I have no where to delete it and re input the info.... please help. Thanks a bunch!

Any info or answer will be greatly appreciated!

[PennyJ · Accepted solution]

If your plans are to operate the farm as a profitable business, rather than as a hobby or for personal use, you are allowed to deduct your expenses even if there is no income.  There are no strict criteria to determine if the operation is a business or hobby.  You can review some general information about this topic by clicking here.

As to specific deductible expenses, the mortgage interest and taxes are deductible.  The fruit trees, well, machinery, and greenhouse should be depreciated since they have a useful life over one year.  You may want to review IRS Publication 225 – Farmer’s Tax Guide by clicking here.

I was unable to recreate the problem you are experiencing with the farm name.  You should be able to access everything you have entered in the following manner:

1.    Click on the Business tab

2.    Select “I’ll choose what I work on”

3.    Scroll down to “Farm Income and Expenses” and select “Visit All” to the right.

You will also want to make sure your software is up to date.  It appears you are using a desktop version of TurboTax.  If you don’t have automatic updates set in your preferences, you can update by:

1.    Select “Online” from the menu bar

2.    Then, select “Check for updates”

3.    Follow the onscreen instructions

I hope this answers your question.  If you have additional questions or comments regarding this issue, please feel free to reply to this post for further clarification. Thanks for trusting TurboTax with your tax preparation.

[autumn_river_200]

Thank you very much! It is very helpful!  Another thing I encountered while I was doing the return is that it only ask whether either me or my husband own the land? But both of us own it together, so not sure how I can do it? Can I just use my husband's name? Thank you!

[PennyJ]

If you are filing a joint return, you can use either name.

[autumn_river_200]

Thank you! I just read the turbo tax help section, it asks me put 50% under my name and 50% under my husband's name, and do the farm section twice, is it true?

[autumn_river_200]

Thank you, Penny!  Sorry my last question is a bit confusing.  I just want to confirm with you that using just my husband's name is fine even if both of us on the deed, right?  I feel redo the farm section with 50% going to either of us is kind of strange, so I prefer just using one of our names. Can you help confirm?  Thank you!

[PennyJ]

You are correct.  On a joint return, it is okay to only use one name on the farm as the income (or loss) will be added to all other income and taxed as married filing jointly.

[autumn_river_200]

Thank you so much, your help is greatly appreciated!