Tax and Investment Benefits - Heart's Desire Farm LLC

Tax and Investment Benefits

Raising alpacas is an enjoyable, satisfying lifestyle that offers some very attractive tax and investment benefits. All the expenses related to the care of your alpacas can be written off against your income if you are raising them for profit.

Expenses would include; feed, fertilizer, veterinarian care, hired labor, farm repairs and maintenance, interest, taxes, insurance, farm-related travel & educational expenses, advertising, agistment fees, farm publications, AOBA and other association dues, etc.

Depreciation of tangible property also applies to the Alpaca farmer and can be written off against income. Capital improvements such as barns, fences, pond construction, driveways, and parking lots can be expensed over their useful life. Equipment such as tractors, pickups, trailers and scales each have an appropriate schedule for write-offs.

These expenses can also help shelter current cash flow from tax.

Alpaca breeding allows for tax-deferred wealth building. A small owner can purchase several alpacas and then allow his herd to grow over time without paying income tax on its increased size and value. If the same amount of money were invested in a Certificate of Deposit, any interest earned would be currently taxable. In addition, the C.D. could not be depreciated, thereby offsetting the tax due on current income.

We recommend that you consult an accountant for advice in setting up your books and determining the proper use of these concepts. A very helpful IRS publication, #225, entitled, The Farmers Tax Guide, can be obtained from your local IRS office. There is also a direct write-off (expense) method known as Section 179 that allows a substantial deduction (currently $19,000) each tax year for newly acquired items that are normally long-term depreciable assets.

The major tax advantages of alpaca ownership include the employment of depreciation, capital gains treatment, and if you are an active hands-on owner, the benefit of offsetting your ordinary income from other sources with expenses from your farming business. Wealth building by deferring taxes on the increased value of your herd is also a big plus. It pays to keep your eye on the tax law changes instituted by Congress. On occasion, you may find a silver lining in the clouds of government.

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Rt 2 Box 406 - Clarksburg, West Virginia 26301
P. 304-622-4499 F. 304-622-3334