It can be difficult for beginning farmers to raise enough capital to get their operation off the ground. Existing farmers may rent or lease land, machinery, and buildings to new farmers until they can purchase their own equipment. The Iowa Finance Authority offers a program called the Beginning Farmer Tax Credit that encourages established farmers to help beginning farmers in their endeavors.
Iowa asset owners who lease their assets to beginning farmers can receive a tax credit through the Beginning Farmer Tax Credit program. Iowa residents must be at least 18 years old and have a net worth not exceeding $737,000.
The applicants must also have sufficient education, experience, and training to run the farm. They should also have the necessary working capital to operate the farm. There are no restrictions on income from other sources.
“I get a lot of calls from a lot of states saying help us get this program,” says Steve Ferguson, Executive Director of the Iowa Finance Authority. “It’s a great incentive program to help a beginning farmer rent some farm ground from a landlord in Iowa, because the landlord is going to get a tax credit to reduce their state of Iowa income tax.”
Lease agreements must be in place for at least two years and maximum five years. The lease agreements must also include land and any machinery, buildings or equipment.
The type of lease agreement will determine which tax credit benefits are available for veteran farmers. For cash rent leases, tax credit equals 5%. Cash rent agreed upon cannot exceed 30% above the average cash rental for the county. The tax credit for a crop share lease is 15%.
The Iowa Finance Authority can issue up to $12 million in tax credits a year, and Ferguson says they have not gotten close to that number since the program’s inception in 2007.
Applications are accepted until August 1, or until all tax credit requests have been approved.
“You can submit a change request and we will approve changes, but we can only approve changes that are beneficial to the beginning farmer,” says Ferguson. “Obviously raising the cash rent is not a benefit to the beginning farmer.”
Source: Successful Farming