University of Maryland Extension

Agricultural Operations and Deducting Expenses on Your Taxes

Paul Goeringer

Photo by Edwin Remsberg

This post should not be construed as legal or tax advice

            For those who do not know, agriculture is the only industry that the Internal Revenue Service (IRS) allows to continue using the cash accounting method for tax purposes.  Cash accounting is simply recognizing income when it is received and expenses when paid.  For example, Stan harvests corn in 2014 and stores a portion of his crop.  Stan sells a portion of the stored crop in 2015, and would not recognize that income on his taxes till 2015.  Farms may also choose to use the other accounting method -- the accrual method, used by all other industries.  Accrual accounting is when you report income and expenses in the year they incur.  The idea behind accrual accounting is to allow for the matching of income and expenses.

To continue reading, click over to the Maryland Risk Management Education blog. 

Maintained by the IET Department of the College of Agriculture and Natural Resources. © 2021. Web Accessibility

University programs, activities, and facilities are available to all without regard to race, color, sex, gender identity or expression, sexual orientation, marital status, age, national origin, political affiliation, physical or mental disability, religion, protected veteran status, genetic information, personal appearance, or any other legally protected class. If you need a reasonable accommodation to participate in any event or activity, please contact your local University of Maryland Extension Office.