Tax Considerations When Using USDA Livestock Programs

Producers using disaster assistance as loss mitigation tools need to keep in mind that there may be tax implications, such as the Emergency Conservation Program, which funds replacing fencing. Oklahoma State University Extension Specialist J.C. Hobbs.

“We're looking at the value of the fence that was lost. Here comes the problem with that. A fence that we build on the farm is depreciated to zero within seven years. So if that fence is more than seven years old, more than likely its value for the tax purposes is zero. Consequently, any reimbursement that would come is going to be taxable to the extent that it is greater than the cost of replacing that fence.”

There's also the Livestock Forage Disaster Program.

“So feed loss is a little different ball game. It's normally a deductible expense in the year that we buy it. So if we get reimbursed for some of that, we may not have a fully deductible expense, but more than likely we'll have to use that money to buy the replacement fee. Therefore, that reimbursement comes out being zero and non-taxable. So you really got to look at what the item was, and if there's any reimbursement from USDA or even from an insurance company that impacts how much of that loss is being taken care of from proceeds from either an insurance company or USDA.”

J.C. Hobbs with Oklahoma State University Extension.