Farmers can deduct ordinary and necessary expenses they paid for their business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense means a cost that is proper for that business. Common deductible expenses include amounts paid to farm labor, depreciation of things like buildings, equipment, livestock vehicles, and machinery, gasoline, electricity, oil, water, vehicle maintenance, insurance, and similar expenses. These expenses must be allocated expenses between amounts attributable to business and personal use. Generally, the personal part of these expenses is not deductible.

The establishment of new a Virginia farm winery and/or vineyard and capital improvements made to existing Virginia farm wineries and/or vineyards may qualify for an individual or corporate income tax credit available for Virginia farm wineries and vineyards. The credit is generally equal to 25% of the cost of all qualified capital expenditures. Our tax experts will help you determine if you qualify and help you obtain the right tax credits for your agribusiness.

If you sold livestock or other farm related items that you bought for resale, you must report the sale. Depending on the holding period and the type of property, these sales are reported differently however, your profit or loss is always the difference between your selling price and your basis in asset or livestock (including the undepreciated original cost of the livestock, sales taxes paid, freight paid, etc.). The sale of raised livestock held primarily for resale is also taxable and you must report these sales. The gain from a sale of animals not held primarily for resale and livestock held for draft, breeding, dairy, or sporting purposes are reported on Form 4797 and depending on holding periods and type of animal/livestock may receive preferential capital gains tax treatment.