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Tax credit program helps beginning Iowa farmers rent land

As a beginning farmer, obtaining enough capital to get your operation off the ground can be a struggle. New farmers may buy used equipment, or rent and lease land, machinery, or buildings from established farmers until they’re able to buy their own. The Iowa Finance Authority offers a program to incentivize established farmers to assist beginning farmers in their endeavors, called the Beginning Farmer Tax Credit.

The Beginning Farmer Tax Credit program provides a tax credit for Iowa asset owners when they lease their assets to beginning farmers. Applicants must be residents of Iowa, at least 18 years of age, and have a net worth of no more than $737,000. 

Applicants also must have sufficient education, training, and experience for anticipated farm operations, have adequate working capital necessary to operate the farm, as well as be the owner and operator of the farm they are applying for. There is no restriction for off-farm income sources.

“I get a lot of calls from a lot of states saying ‘help us get this program,’” says Steve Ferguson, executive director of the Iowa Finance Authority. “It’s a great incentive program to help a beginning farmer rent some farm ground from a landlord in Iowa, because the landlord is going to get a tax credit to reduce their state of Iowa income tax.”

Lease agreements must exist for a minimum of two years and a maximum of five years, and the lease agreements must include land in addition to any machinery, buildings, or equipment.

For the veteran farmer, there are a variety of tax credit benefits depending on the type of lease agreement. For cash rent leases, the tax credit equals 5% of the cash rent, and the cash rent agreed upon cannot equal more than 30% above the average cash rent for the county. For a crop share lease, the tax credit is 15%.

The Iowa Finance Authority can issue up to $12 million in tax credits a year, and Ferguson says they have not gotten close to that number since the program’s inception in 2007.

Applications are accepted until August 1, or until all tax credit applications have been awarded. 

“You can submit a change request and we will approve changes, but we can only approve changes that are beneficial to the beginning farmer,” says Ferguson. “Obviously raising the cash rent is not a benefit to the beginning farmer.”

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