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

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.

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

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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