Year-End Tax Planning for Farmers: Key Strategies for the Current Environment
The 2025 tax year brings both challenges and significant opportunities for farmers and ranchers. During the recent FCS Financial webinar, Jessica Lehmen, CPA, of Williams-Keepers LLC, shared strategies to help you manage your income and expenses, take advantage of new legislation, and plan for long-term financial health.
Major Tax Updates for Farmers
The most important takeaways from this year's tax planning revolve around depreciation and changes in Missouri state law:
100% Bonus Depreciation is Back: The single most important update for equipment-heavy farm businesses is the reinstatement of 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This allows for the immediate expensing of the entire purchase price of eligible assets in the first year.
Missouri Capital Gains Exemption: For 2025, Missouri no longer taxes capital gains for individuals. This means 100% of all capital gains reported federally can be deducted when calculating Missouri adjusted gross income. This applies to long-term sales of investments, farmland, and qualified livestock sales (held for draft, breeding, dairy, or sporting purposes).
Income Reduction and Long-Term Planning
Beyond depreciation, here are other critical strategies to discuss with your tax advisor:
Retirement & Savings: If you anticipate a profitable year, consider utilizing Simplified Employee Pension (SEP) plans or Simple 401K plans to reduce taxable income. Health Savings Account (HSA) contributions are also an excellent way to get a deduction now and use the funds tax-free for future medical expenses. SEP and HSA contributions can generally be made after year-end but before the tax deadline.
Charitable Giving Strategies: To maximize deductions, especially if you are close to the standard deduction amount, consider bunching your charitable contributions into a single year to allow for itemizing deductions every other year. Farmers can also benefit from direct in-kind donations of livestock or grain to charity, which removes the income from their adjusted gross income (AGI).
Estate Tax Exemption: The federal estate tax exemption has been permanently increased and indexed for inflation, rising to $15 million per person in 2026 (from $13.99 million in 2025). This reduces the number of estates subject to federal tax. For those unlikely to hit this high threshold, the best strategy is often to hold assets until death so your heirs receive a "step-up" in basis, minimizing their future capital gains tax.
Additional Education: FCS Financial Ag Seminars
For continued education around agriculture economics and general tax topics, we invite you to attend our upcoming Ag Seminars:
January 21st in Springfield
January 22nd in Chillicothe
The registration deadline for the January Ag Seminars is January 16. Farmers and ranchers are encouraged to register quickly, as seating is limited, and reservations are requested.
Click here to register online: https://www.myfcsfinancial.com/about-us/ag-seminar
FCS Financial is dedicated to hosting meaningful events that invest in the future of agriculture. We look forward to seeing you at our upcoming seminars!
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