Can I start a greenhouse business with 20 acres and deduct my truck, tractor, and greenhouse material?

by Kurtis L. Groff, CPA | May 07, 2018
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I own 25 acres. Twenty are in agriculture and the other five is where my house is. Can I start a greenhouse business and deduct my truck, tractor, and greenhouse material?

Using 20 acres for farming purposes would allow the deduction of your direct input costs of the greenhouse business, including supplies, seeds, use of the tractor, etc., so long as you are operating it as a business with a profit motive. The depreciation deduction may be limited for the tractor if it is not used solely in the business, and your truck will only be deductible for the miles driven for the business. Personal use of the vehicle would not be deductible.
  
In general, you need to be aware of the hobby loss rules that require a business to be operated to produce a profit. You will want to follow the guidelines for operating a business for profit that requires separate record keeping, a separate bank account, and training and education to show you are qualified to operate this business. And you must have a profit motive.
 
Small businesses can be deemed hobbies if you are not following these and other guidelines for operating a business. Be careful to separate out any expenses that relate to personal consumption of produce, as these are not business deductions. If you are found to be operating this as a hobby, the net losses that are deducted on your tax return can be denied by the IRS. An activity can be deemed to be operating for profit if you produce a profit three out of five years.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Kurtis L. Groff, CPA, is a partner with Simon Lever LLP in Lititz, Pa.

Disclaimer
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