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The NDSU Extension weekly podcast In the Pod: Soybean Updates delivers timely insights and expert advice on soybean production.
You're listening to In The Pod, soybean updates, a weekly trek into the latest soybean information from NDSU Extension. As we close in on the end of the year, income taxes become a bit more of a priority. Ron Haugen, NDSU farm management specialist, has advice on income taxes and the changes from last year. Ron, it's that time of the year. Let's talk about tax planning.
Ron Haugen:Yes. As you mentioned, it's that time of the year, and producers are always thinking about tax planning this time of the year. Really, producers should think about tax planning throughout the year. When you do tax planning, it's always best to to make a good estimate of what your income and expenses will be for the year and also estimate your depreciation. Remember that you may have deferred some income into this current year. You don't wanna forget about that either.
Bruce Sundeen:It's always confusing for me. What about filing times and dates?
Ron Haugen:Farmers are kind of in a unique situation. 03/02/2026, they can file the returns without any penalties. They didn't have to do any withholding or anything or any make any deposits. If they have their taxes roughed out and they kinda know if they owe some, they can make a deposit by January 15, and then they're allowed to file by April 15 with everybody else. It gives you more time to prepare your return and check your return over. March 2 comes pretty quick sometimes.
Bruce Sundeen:Ron, what are some of the tax basics that farmers need to know?
Ron Haugen:Producers have the ability to file for their regular depreciation, the 200% declining balance. For most new equipment, the recovery period is five years. Used equipment is seven years. The $1.79 expense has increased to 2 and a half million on newer used equipment, and it starts phasing out at 4,000,000 to a full phase out at $5,000,000. The one hundred percent first year bonus depreciation. Congress has determined that they were gonna phase that down. Every once in a while, they'll say, well, reinstate it to a 100%. But it has been in the phase down period now. So at this current year, it was set to be 40% instead of a 100%. But with the passage of the reconciliation bill, they bumped it back to 100%, and it starts January 20 and on. If you made purchases between January 1 and January 19, you're still at 40% bonus. Also, there may be some situations where producers have net operating losses. Net operating loss carry back rules are in effect for producers. It's very favorable for them. They can carry back a loss and maybe get a refund of their taxes. Also, there's income averaging that if you have a high income year, you may be able to spread that out over previous years. That's done on schedule j. The North Dakota tax code has form n d one f a for income averaging. As far as tax planning, if you had a low income year, you can actually amortize your fertilizer purchases and spread them out into future years. You can also capitalize repairs. What that means is instead of deducting a whole repair, you can actually depreciate that out over time. Capitalize it. You can also postpone some of your expenses into the next year. Hopefully, your income will be higher, and you'll have some expenses to offset that. And if you're in a low income year, I probably wouldn't recommend using up all of your $1.79 expense just for that. You probably don't wanna do that on all of your purchases. I would also encourage contributing to a retirement plan because that's always a good idea, especially if you're younger because you get old pretty quick. And before you know it, you need to think about retiring. So it's always a good idea to take some of your income and contribute to a plan.
Bruce Sundeen:Thanks, Ron. Our guest has been Ron Haugen, NDSU farm management specialist. You're listening to In the Pod, soybean updates, a weekly trek into the latest soybean information from NDSU Extension supported by the North Dakota Soybean Council.