Research And Development Tax Credit

Farmers are always looking for ways to keep more money in their pocket at tax time. The Research and Development tax credit is a little-known tool that could help you do just that. It rewards businesses for innovation that is only required to be new to them, not new to the world.

Julie Spiegel is a certified public accountant for Varney and Associates of Manhattan, Kansas. She says the tax credit has predominantly been used by manufacturing companies, but its broad focus also applies to agriculture and farming.

"It could be improved processes to increase your yields and production efficiency. That could be as simple as experimenting with new fertilizers, planting cover crops, planting disease-resistant crops," says Varney. "On the rancher side of things, it could be experimenting with new feeds or feeding techniques for your livestock. For the hog operations, it could be improving facilities for environmental and biosecurity reasons."

Contact your CPA or a specialty firm to see if the R-and-D tax credit can be applied to your operation. If you’re willing to compile the required information, the financial benefits could be substantial.

"The important thing to remember is a tax credit is better than a deduction, so it’s a dollar-for-dollar reduction of any taxes that you owe at your end. For example, I have a smaller local farmer and he was willing to go through the steps himself and come up with the information, and he was able to get himself a $5,000 tax credit. So, he just saved himself $5,000," she says. "For some of the larger operators, it can be tens-of-thousands of dollars."