Starting a new farm (Washington, Winter Harbor: to buy, school, income)
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The Cooperative Extension in Washington County offers a business clinic once a month. Extension offices aren't county exclusive so you can use information from all counties regardless of where your property is located. If you can't get there you call to talk with Lou Bassano. He should be able to give you info. He has been very helpful with both of my businesses.
I hesitate to give tax advice. Looking at a Schedule F might be helpful.
Originally Posted by forest beekeeper
You thought that Maine writer was posting as Farm Babe?
Oh, I get it, yeah a babe. cool.
That's it! When she saw Farmer Babe's name she though I'd changed my name. Isn't she sweet?
Taxes, regulations, land status, minimum acreage...it's enough to make your head spin! I thought we were leaving the city to get away from that stuff!
If ya want to farm, just go ahead and raise whatever you like. I guess it does depend on where in the state your land is located, but geez, people, can't a guy (or a babe) just raise some crops and a little livestock for personal consumption? Does everything have to revolve around money and the state?
Reminds me of those folks always looking for subsidies, then wondering why they have problems!
Yes, it might have to revolve around money. If you're growing for yourself it's one thing. If you're growing for sale you're creating a business. Businesses have to have licenses, possibly collect and submit sales tax for the state of Maine (we are not reimbursed for this), file even if we haven't collected sales tax to submit, and on and on and on. If you're operating as a business you need a tax number from Augusta. If you're selling a tomato by weight you need a Dept of Ag inspected scale. There's a fee for that. Get a receipt, it's deductible. License fees are deductible. If you're growing for yourself mileage doesn't matter. If you drive your tomato to farmers market keep track of the mileage. If you drive to buy that tomato seed, write down the mileage. If I were growing for myself only my greenhouse expenses wouldn't be deductible but I'm a business so I can claim expenses. Don't forget propane to heat one of the greenhouses - I sell the seedling and produce from seedlings, it's deductible. I can deduct my seeds, seed starting medium, the 600 six packs I had to buy this winter, the popsicle sticks that will label 2,000+ six packs, even the Sharpies I use to write out all of those sticks. I get to claim those because I farm as a business. Workshop fees, association dues, magazine subscriptions - the list is a million miles long if you're a business.
Farming revolves around money and the state (and the feds) at an alarming rate. If you're homesteading for your own purposes you'll spend a lot less time at your desk counting pennies, filing receipts (hahahaha a box is a file, right?) and running a business.
PS I had no problem with my subsidy. I got a 70% grant from Soil & Water Conservation, administered by the Farm Service Agency, to help me set up fencing to keep my livestock out of my portion of the stream that crosses our property, create a manure disposal system (dairy goats, horses, cattle, pigs, chickens, ducks, turkeys and 1,000+ New Zealand White meat rabbits) and put some of our natural springs into use for livestock watering. It was a small subsidy but it was a huge boost to a new farmer who didn't have a clue about proper fencing, manure disposal systems or natural springs. Two people came out from S&WC to help me before I started so that I'd know what I was doing and after to inspect before my grant money was deposited into my checking account. We so firmly believe in that particular program that Steve became a volunteer member of SW&C and is now in his fourth year as CoB, also as a volunteer, as a result of that subsidy. He's more than paid back the small amount of money I received with many years of service.
Unfortunately taxes are a part of the complete equation.
If you own property and do any activity you will likely be paying some form of tax.
If you had 10 acres, and each acre were taxed $1,000 / year; then no matter what your lifestyle is like or what you do; every year you must first earn $10,000 for property taxes.
Add some heavy equipment and those taxes, and you might be paying $20,000 / year in property taxes.
These are all numbers, and thoughts that you must consider before beginning a farm.
Whatever your going to need: to feed your family and electric use, and operation of a farm, etc. Your budget will need to include your taxes.
Taxes become an integrated part of farming. My parents and Grandparents have lost farms, so I am familiar with some of the processes which can lead to losing a farm.
A farmer needs to stay on top of his debt load. And on top of his taxes, and he needs to earn enough outside income to support his family. This is before you really get to soil conditions, crops, weather, and market pricing.
I am not advocating subsidy programs at all.
Obviously farming in our society has problems, and any problem being addressed with subsidies, is not a problem that is going to get better.
Look at how subsidizing schools has worked for us. We now have a 65 year history of subsidizing schools, has it made better schools? We started doing this as an experiment, and each year it only consumes more money, raising taxes everywhere. Is there a point where we realize that maybe putting schools on subsidies was a bad idea?
A prospective farmer needs to assess the complete equation. His lifestyle cost-of-living, which includes property taxes. What equipment he will need, and the cost of operating a farm. what outside income source he will have. And lastly soil conditions, crops, weather, and market pricing.
As a farmer I will chime in as there is a bit of truths and myths on what was said.
There actually is a acreage standard set by the Gov and for any NRCS help its 5 acres or more, used for agricultural purposes that generates 1,000 bucks a year or more. Now it depends on the administration in each county, but being entitled to money does not mean you will get it. Certain classes of animals are consider minor or major, so if you have sheep which is considered a minor species, you won't get much money. You won't get much money either if you are near the minimum acreage and yield levels either!
What happens is, this entire country is laid out in 1 mile blocks, and every so many years money becomes available per these 1 mile blocks as administered by the county they are in. You apply for funding, have your application approved by the county ag commitee, and you are put on a waiting list so when money for that area becomes available, you get your money. With so much money being requested, and so little given out, you may be on the list a VERY long time. For instance in the county where I live, the priority here is to save the local dairy farms from extinction. If they apply for funding, they will get priority and get it, so a person looking to start a sheep operation, will go years without any help. Either way you sign a contract and are obligated to adhere to that contract. Be careful...sometimes you can save money by doing it out of pocket because of all the restrictions on these "free" offers!
For most purposes though, the 10 acres or more, and 10,000 dollars a year for 3 consecutive years rule applies. In fact it applies to just about everything in farming. Training, classes, loans, etc. This is the standard that is set that basically determines if you are a farmer or homesteader and is pretty hard to get for the begining farmer. This opens up a world of options however.
Finally there was the 70% matching grant that was mentioned. Since 2004 this system is no longer in place. You get a flat fee for the project...no need for money up front. You are either approved or not by the local ag commitee by a final price set forth by the NRCS Agent. If you do your project according to specs but are under the price, you keep the extra money. If you go over that price...you pay for it. Be very cautious however, all gov money is considered income so you must claim it and then deduct it on your income taxes.
We had a FSA Loan where we were given 40,000 bucks to build a 15,000 dollar heifer barn. Because we failed to account for the extra money due to a multi-year issue, the IRS fine was 40,000 bucks. In other words that barn ultimately cost us 40K by using "free gov money" when we could have built it out of pocket for 15K. Live and learn I guess. Just be very leery about Gov programs. They can be to your advantage, but they can kick you in the butt too. I stay clear of them as much as I can.
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