# Tax Deduction Rules for Beekeeping



## Curry

My understanding is that beekeeping falls under "Farming" as far as taxation goes. I would like to write off the expenses I incurred to get my 60 hives this year. Does a beekeeper have to have a business license? What are the tax rules as far as write-offs go- can I write it all off in one year or do I have to amortize it over 7 years? Mileage can be written off also? I didn't purchase any large ticket item, just hives, bees, sugar, etc., but still cost a small fortune.


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## Dave W

Greetings Curry,

I am NOT a CPA. My "tax training" comes from being self-employed (carpenter) for the past 20 yrs.

A "business license" is not required to report income or loss on tax forms. Your city/county, state, may require a "license" to sell your product(s), especially on a retail level.

If you did not have an "income" from your bees, it might be wise to postpone as much of your "start-up" cost until you can use it to off-set some money earned.

You MUST have a receipt for ANY item(s) you wish to deduct.

Woodenware (hives) would be something that you might elect to amortize, but remember things like "sugar" are "operating costs" that must be deducted in the year purchased or lose the deduction.

"Mileage" used to secure materials - like sugar, pick up package bees or hives, is deductable in the year they occur. Mileage used must be documented. Its easy, when you have a vehicle dedicated for single use (company truck).

Remember, hobbies are not tax deductable. If you have a "loss" three years in a row, Uncle Sam says, "It's not a business".

Of course, if you sell ONE jar of honey, and want to pay taxes, just list as "Other Income" on your 1040.











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Dave W . . .

A NewBEE with 1 hive.
First package installed
April, 2003.


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## loggermike

Beekeeping income and expenses are reported to the IRS on Schedule F.It is fairly easy to fill out.You can write off(expense) a certain amount(up to 25000 I think but I would have to check)of depreciable property in a single year rather than drag it out.If you have income from a real job,you can use a loss figure to bring down the tax on your other income.If not ,then depreciating your hives over a longer period might be better.With 60 hives you are in a business,but as was mentioned the IRS has rules on how many years you can show a loss.


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## ikeepbees

"the IRS has rules on how many years you can show a loss."

Is this really the case? I was under the impression that after consecutive losses in some number of years, flags may go up that cause the IRS to look at you. I didn't think that it was against the rules to lose money in business - just that you may have to demonstrate to them that it is a business. Any CPA's here that know more about this?

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Rob Koss


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## Hillbillynursery

I to was self employed many years. Several of these was raising nursery stock which falls into farming the same as Beekeeping. With nurserystock it takes several years for them to grow. The IRS takes this into account when doing audits. If you show a steady rise in income from your venture as well as expantion they do not bother you. Your expenses need to drop in proportion to the income coming in as you grow or they may ask questions. Since you have 60 hives you should have some income coming in next year. We showed a loss 8 years with no problems with the nursery. Our losses kept dropping and income kept coming up over the years. After about 4 years we made a proffit so we went out and bought a bigger tractor. They know businesses do not spring up over night. They find fault with businesses that keep lossing more and more money without any income.


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## Michael Bush

As I understand it's not a hard fast rule but they want to see a profit two out of five years for most farming. But as long as you can prove that you were running it as a business, kept good records and had a plan that had the potential and intention to make a profit they will accept it. If not, then it is a hobby and is not deductable. I would plan on turning a profit at least two out of five years. In that sense it is sometimes better to write off a lot one year so that you have a better chance at a profit the following year.


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## BjornBee

The theory is if its losses from business operation and thats all you show, a loss year after year, then how long can you survive making nothing? Whats are you doing? Laundering money? Probably hiding something.

If you have a bee business and you do nothing but offset other income (day job), then after 2 years or the third year of losses, trigger red flags and probably an audit. You will have to show you are TRYING to become profitable. You can still offset most losses with income as it says you must show a profit, just never says how much.

Things to remember. If your operating a business, and taking losses or offsetting other income, than ACT like a business. Keep a business log, seperate checkbook, milage logs, keep reciepts, have your stuff in order. This is probably more important in an audit than anything else.

Each state is different. You may need a income tax number if your selling direct (other than a farm stand or place where its produced). Wholesale sales do not usually require tax collection. Whoever sells to the final consumer in most states, is the one responsible for tax collection.(except on the farm.) You may need a ficticious name registered. You may need a food handlers course or other certification to sell at retail establishments. Of course there is the new Federal food act registration, if your selling to markets etc.

As fed tax goes, anything with a use of longer than 1 year, or used the next year must be depreciated. Over the normal expected period of time. When they ask, just make sure you say your hives should last about 5-10 years. If you say 25 years, than its spread out that far.
Sugar, bee purchases, etc, can be written off entirely for that year.
No matter what I say or anyone else, talk to a tax professional.


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## loggermike

You CAN expense your depreciable assets in the first year(within limits)It is called Section 179 expenses.But you do have to make sure it makes sense for your particular situation.In general,if you made a lot of money,you would want to maximize your deductions to lower your tax.You can buy more equipment (that you need anyway)or you can let the taxman have it. http://www.agriculture.com/default.sph/AgNews.class?FNC=sideBarMore__ANewsindex_html___50921


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## WineMan

Mike must be preparing his taxes for the year....LOL


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## loggermike

Nope,I put that job off as long as I can.


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## BjornBee

When did you start your business? Was the purchases before or after you began. Were they acquired as part of the business once started, or as start up costs prior to the business start? Are you deducting from the business income or from other income sources from your day job or your combined (wifes) income also? These questions effect how and whether they can be deducted the first year or taken over time.

ignorance is not an excuse, when the irs looks at you. Talk to a tax prep professional.


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## txbeeguy

Seems like I looked into this 'taxing question' (pardon the pun) a few years ago. And to make claims on beekeeping expenses as a "farming" enterprise, I looked up the regulations involving farming. As I recall, in order to claim yourself as operating a farming business, more than 50% of your income has to come as a direct result from your farming operations. I believe this is still the criteria for listing farming as your occupation.
-- 
Disclaimer: I am not a CPA; opinions are like #!x's - everybody's got one; take two aspirins and call me in the morning.


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## Jim A Ohio

There was a good general discussion of taxes for beekeeping in the April 2003 issue of The American Bee Journal (p. 273). The author discusses the section 179 deduction and mentions that it cannot be used to create a loss so he suggested that it is best applied in years of high profits.


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## Dave W

Here is a fact you may find disappointing.

You buy a lot of equipment (hives), write-off the cost (depreicate or lump sum), you decide to sell all or any part, you OWE taxes on the amount received.

Here's the problem, if you cannot make a "go" of the bussiness (no profit) it will cost you money to "go-out-of-business".

And dont forget to file your "business property taxes" while you own the hives, you must pay taxes on ALL equipment used to produce your income taxes!!!!!

Have a safe New Year


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## Hillbillynursery

To quailify under farming you must have so much land. I think the min. is 3 acres. If you grow a large garden with the soul purpose of selling vegtables you are farming. If you raise a big garden and only sell your extra produce it is not classed as farming. We got into this about 3 years ago. We were growing veggies in large plots. We had no personal garden. The nursery inspector came around to inspect our trees for shipment. He noticed our large plots of veggies. He asked if we had a garden spot for home use. We answered NO. His next question was did we use any of the veggies for home use. We did and answered YES. He informed us of the laws so now on we plant a little of everything in a plot near the house and call it personal use. The rest is listed under farming. As with most farmer raising products for sell we eat the produce that has the bug bite or is missed shaped. The garden spot is just there for show. You do need to see what the laws are in your area along with the fed. IRS laws. My father and I are going to go look at 27 hives this weekend if it is pretty. Another beekeeper going out of business. He said since I like working them so well he would put the cash up. This would take me to the number of hives I was planning on having in 2 years. If we get them I will claim them as a business.


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## loggermike

This whole discussion is proof how far we have come from being a free country.We need less taxes and gov. intrusion in our lives .Unfortunately the trend is going the other way.Just my opinion.


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## Dave W

Can someone tell me why "farm" and "non-farm" income is separated? What are the pros & cons of each?


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## Michael Bush

Bees are farm income. No matter what the pros and cons.


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## Curry

Thanks all for your replies. And yes, we did make a lot of money this year (in things other than bees) and so I'm looking to minimize what Uncle Sam is going to steal from me. That was one big reason for getting into bees- to protect my wifes business income.


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## loggermike

Well Curry,you cant beat bees for getting lots of money spent!


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## nursebee

Interesting..

I searched this out and read a lot of IRS tax bulletins. Have you read them?

Write-off is a term that I see misused. I now think of it as expenses in the business counting against the proifts of the business, not the expenses of the business counting against my income as a registered nurse.

Descriptions of beekeepers as farmers when they have little land ownership is not well understood by me. USDA folks (or similar US agencies) that run the honey loan program wanted to turn me away as I did not "farm a crop" when I asked about these programs.

I would develop an ongoing relationship with an accountant and let him help you out.


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## txbeeguy

> Descriptions of beekeepers as farmers when they have little land ownership...

I think the earlier posting about having to own some minimum acreage must be related to a state income tax law. I don't believe the Federal income tax law requires this. 

For instance, we don't have a state income tax here in Texas and I know several "farmers" who don't actually own any land. I think the old fashion term for this is "share cropping" - that is, they make a deal with the person who actually owns the land to grow some kind of crops on it, in exchange for splitting the profits earned from those crops.

About the other person's question as to why 'farm income' is treated different than any other type of business income I believe has to do with all the special concessions in tax law given to farmers (not to mention all the other special ag programs for paying farmers to NOT grow something-or-other and paying them for having their land in soil conservation programs, etc., etc.). Besides, the American public usually is highly supportive of all these farmers "barely scraping by" (I supposed it's because of our agrarian roots as a nation).


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## Guest

Hillbilly,
So as long as I separate one hive aside 
from the others I can still eat those bees and get tax credit for the others in separate hives?


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## Guest

Hillbilly,
So as long as I separate one hive aside 
from the others I can still eat those bees and get tax credit for the others in separate hives?


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## Hillbillynursery

I have never dealt with it with bees. You could always slip a little to yourself without uncle sam knowing that you are counting that hives expenses with the business. It only becomes an issue if you are inspected like we have to be for growing trees. We grew some fruit trees. We were told that all produce grown from the stock plants had to be counted because of the expense we list for taking care of the trees. It was never much as we only had a couple of trees of each variety. So we told them we let the fruit fall. We never sold any but ate most of them.


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## Ian

>>write off the expenses I incurred to get my 60 hives this year.

Are you claiming your income off your 60 hives? If yes then you get set up to claim expenses occured aginst that honey income. All expenses used to produce that honey can be claimed as an expense. By buying bees and equipment for your honey buisness, you can use it against or deferr your taxes to next year. 
If you take a loss in you honey veture, Im not sure how it works in the US, but here in Canada you can claim any farming loss incured in that tax year. I think it can only happen a few times before you get red flagged. 

Ian


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## wfarler

I am not a CPA just a farmer but this is my understanding.

For farming and most other business ventures the IRS rule is 3 profitable years out of 5 except for Horses which is 7 years.

One person needs to be farming full time but the rules are loose, can even be an uncle (family farm friendly rules). You don't have to use farming as your business class, many of the farming specific rules are crop and livestock related and not much use to a beekeeper. If you and your spouse both work and beekeeping is a sideline you may be better off to operate under a different set of rules than farm. You can use sole proprietorship, LLC, Corporation etc. They have different tax and liability implications.

Documentation is important to prove you are not engaged in a hobby. While reporting income and paying taxes is a good way to avoid questions and audits if you choose to take losses in your first few years you can offset regular family income. If you incorporate you cannot do this - although you can carry forward your losses. What I've read about court rulings is the test is focused on intent to make a profit and that your activities reflect that intent. This is why mixing business and personal becomes such an issue - it dilutes your intent. The 3 profitable years out of 5 rule is not hardfast - if you can prove you are engaged in business and seriously attempting to make a profit then you can claim additional years of losses but you could end up in tax court too.

Records of you time, expenses and mileage are important. One of the IRS test's is 500 hours spent on the business activity. They will want to see days, hours, and the activity.

Section 179 was mentioned and allows you to accelerate depreciation. If you have a projection of what your business will look like (are you expanding? sideline? etc.) you might want to plan on when you want to make a profit and when to make your capital upgrades (and therefor Section 179 write-offs). You might want to report income early on before you are in a position that you have more income to balance against accelerated depreciation. Alternately, you might want to time your purchases of feed, chemicals, etc.

I used TurboTax last year to do my return and it did a pretty good job of preparing the farm schedule. I had to read the rules on section 179 eligible equipment. This year will be a little more complicated with the livestock but we will see.

I fully intend to make a profit at beekeeping the next three years - and have fun doing it.


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## wfarler

I am not a CPA just a farmer but this is my understanding.

For farming and most other business ventures the IRS rule is 3 profitable years out of 5 except for Horses which is 7 years.

One person needs to be farming full time but the rules are loose, can even be an uncle (family farm friendly rules). You don't have to use farming as your business class, many of the farming specific rules are crop and livestock related and not much use to a beekeeper. If you and your spouse both work and beekeeping is a sideline you may be better off to operate under a different set of rules than farm. You can use sole proprietorship, LLC, Corporation etc. They have different tax and liability implications.

Documentation is important to prove you are not engaged in a hobby. While reporting income and paying taxes is a good way to avoid questions and audits if you choose to take losses in your first few years you can offset regular family income. If you incorporate you cannot do this - although you can carry forward your losses. What I've read about court rulings is the test is focused on intent to make a profit and that your activities reflect that intent. This is why mixing business and personal becomes such an issue - it dilutes your intent. The 3 profitable years out of 5 rule is not hardfast - if you can prove you are engaged in business and seriously attempting to make a profit then you can claim additional years of losses but you could end up in tax court too.

Records of you time, expenses and mileage are important. One of the IRS test's is 500 hours spent on the business activity. They will want to see days, hours, and the activity.

Section 179 was mentioned and allows you to accelerate depreciation. If you have a projection of what your business will look like (are you expanding? sideline? etc.) you might want to plan on when you want to make a profit and when to make your capital upgrades (and therefor Section 179 write-offs). You might want to report income early on before you are in a position that you have more income to balance against accelerated depreciation. Alternately, you might want to time your purchases of feed, chemicals, etc.

I used TurboTax last year to do my return and it did a pretty good job of preparing the farm schedule. I had to read the rules on section 179 eligible equipment. This year will be a little more complicated with the livestock but we will see.

I fully intend to make a profit at beekeeping the next three years - and have fun doing it.


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## Hillbillynursery

For farming and most other business ventures the IRS rule is 3 profitable years out of 5 except for Horses which is 7 years.

This is what I was getting at. I lost money the first 4 years in my firework business. One of the things the CPA said was he was glad I list each tent with thier location to help prove I was growing instead of using it as a write off. With horses you can go upto 10 years without showing proffit if you prove you are growing. This means you need to have your income from the business increase along with the losses getting smaller. With my tents I used a rapid deprecation for my tents. The third year was the year I purchased the second tent. The fifth year I showed a $7,000 increase since the tents were depreciated out. And this business has a selling time of 2 weeks and one day. You can keep showing losses if they and you can see the light at the end of the tunnel.


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## WineMan

Ill make a suggestion of using a specialized cpa to work on your taxes if you have a significant percentage of income from bees or are starting to spend large sums accumulating equipment, etc. 

When you start talking about depreciation schedules, self employment taxes, farm income averaging, schedules J/K, what type of organization (sole proprietor, LLC) works best, bla, bla, bla, a good CPA can be valuable regarding taxes and your short/long term financial goals. Further, a CPA who often deals with farm returns is ideal. He/she will know the exact codes which apply specifically to farm incomes.


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