The tax bite from a land sale can be a real disincentive for older farmland owners to sell to young farmers. An exciting new Minnesota law may provide just the ticket to help us move land to the next generation of farmers.
The Minnesota Beginning Farmer Tax Credit – available for the first time in 2018 – will provide state income tax credits to incentivize the sale and rental of agricultural assets to beginning farmers. The credits are:
- Five percent of the sale price value, capped at $32,000;
- 10 percent of the rental agreement value, up to $7,000 per year;
- 15 percent of the share rent agreement value, up to $10,000 per year, taken off of your Minnesota income tax.
For more information, see mda.state.mn.us/agfinance.
Here are some Frequently Asked Questions, courtesy of the Central Minnesota Young Farmers Coalition:
- Who is a ‘beginning farmer’ according to the bill? This law defines a beginning farmer as, among other things, a resident of Minnesota who is seeking entry or has entered into farming within the last 10 years.
- Are transactions between family members eligible for the tax credit? Unfortunately the sale or rental of agricultural assets between family members is not eligible for the program at this time.
- What else do ‘beginning farmers’ need to qualify? They need to provide the majority of the labor and management for the farm; have some knowledge or experience in the type of farming they’re planning to do; submit a business plan that shows potential for income; and participate in a financial management program.
- Which programs satisfy the financial management requirement? Qualifying programs haven’t been defined yet, but it’s likely that some of the programs listed at this link will qualify.
- Do the beginning farmers have to pay for the financial management program? Yes, but they will receive a tax credit for 100 percent of the program cost.
- Which agricultural assets are included? “Agricultural assets” means agricultural land, livestock, facilities, buildings, and machinery.
Note: As always, policy improvements are the result of hard work by advocates and strong elected officials. Thanks to the Central Minnesota Young Farmers Coalition, the Minnesota Farmers Union and all those who worked to get this law passed.
Teresa Opheim is Senior Fellow at Renewing the Countryside.