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 06-13-2017, 13:29 Post: 59251
lakeman



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Location: Rollag Minnesota
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  Hobby farmers and the 3/5 rule?

The 3/5 rule is the rule of thumb that says you have to make a profit in 3 out of 5 years. If not your operation will be called a hobby and you will only be able to deduct costs up to the amount of income. If your operation is viewed as a hobby by the IRS you are required to report the income and show the deductions on schedule A as miscellaneous itemized deductions wich limits the deductions. In order to satisfy the IRS I would treat your operation as a business. Run seperate checking accounts keep tract of expenses, do financial statements and take steps to make a profit.






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 06-13-2017, 23:18 Post: 59276
lakeman



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  Hobby farmers and the 3/5 rule?

The IRS gives you an option of electing to have them look at the first two years of operation as a loss becasue you are starting up. Then you will have to show a profit in the next 3 years. I would load as many expense in the first year via the 179 deduction etc that you can. Then show profits in last 3 years. They don't say how much profit you have to show.






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 06-14-2017, 09:06 Post: 59285
lakeman



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  Hobby farmers and the 3/5 rule?

I agree 100%. Just use the tax laws to your advantage. Use the correct strategy. (deducting assets in first year through the 179 deduction will leave no depreciation on these assets in future years. Thats when you will show income. Don't try to cheat by deducting personal expnses its not worth it.






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