The South Dakota 4-H Foundation urges you to consider giving a gift of grain this year.
"This is a good time of year for farmers to consider this kind of gift as they work with their tax preparers," says Jim Burg, a Wessington Springs, S.D., farmer and 4-H Foundation trustee.
Nancy Swanson, the foundation's executive director says, gifting grain to the 4-H Foundation is a very viable and desirable option with several tax advantages for the farm operator.
"Self-employed farmers who donate grain to the S.D. 4-H Foundation not only benefit local 4-Hers, they also reduce their self-employment tax and increase their income tax savings," she says.
Grain must be placed in the name of the South Dakota 4-H Foundation to be sold by the foundation. Farmers may take the grain to their local elevator, co-op or grain merchant, where a warehouse receipt showing the 4-H Foundation as the owner should be created. Farmers then notify the foundation that the grain is available to sell. Once sold, the 4-H Foundation sends the farm operator a receipt for the tax deductible gift.
The producer does not include the sale of the gift as income because the producer never received it; thus, resulting in savings on self-employment tax and federal income tax.
The expenses of growing the crop are still included in farm expenses just as they would have been if part of the crop had not been donated, she says.
The gift is not deducted as a cash donation since you aren't including the grain sale as income in the first place. Therefore, it is not deducted again as an itemized deduction.
Here's an example:
The gift of grain donation saves at least 30% of the grain's value in taxes, assuming a 15% tax bracket and a savings of 15.3% Social Security tax. Assuming a 25% income tax bracket, the total savings would increase to 40% of the grain's value. The savings calculation assumes that the farmer otherwise wouldn't benefit from itemizing deductions, which is often the case.
For more information on how to use a gift of grain to support 4-H, contact Nancy Swanson at 605-688-4943 or [email protected].
Information can also be found on the South Dakota 4-H Foundation's web site, www.sd4hfoundation.org.Source: SDSU and the SD 4-H Foundation