Beginning Farmers and Ranchers Tax Credit

Beginning Farmers and Ranchers Tax Credit

Rocky Mountain Farmers Union

Beginning Farmer/Rancher Benefits:

  • Increase their chance to rent agricultural assets.
  • Sign a three-year lease agreement on a farm or ranch.
  • Forge a relationship with an asset owner for potential long term arrangement.
  • Qualify for the Personal Property Tax Exemption (PPTE): Personal property used in production agriculture or horticulture, valued up to $100,000, may be exempted from personal property taxes.
    • The tax exemption may be received each year for three consecutive years
    • Deadline to apply is November 1st of the year preceding the year for which exemptions are sought.
    • Approved applicants will receive an Eligibility Certificate from Colorado Agriculture Development Authority.
    • To claim an exemption of taxable tangible personal property, present the Eligibility Certificate and tax information to your County Assessor by December 31st for approval along with Department of Revenue Exemption Application Form or Forms.
    • Eligibility requirements and application procedures for the beginner are the same whether you apply for the tax credit and/or the PPTE, but you do not need to rent from someone to be eligible for the PPTE.

Asset Owner Benefits:

  • Receive a refundable income tax credit each year for the three-year lease you have with an eligible beginning farmer/rancher.
    • An asset owner will receive a refundable tax credit equal to 20% of the cash rent or 20% of the value of the share crop rent received each year for the three years of the lease.
    • Examples:
      • Cash rent:  100 acres x $250 cash rent per acre = $25,000 total cash rent x 20% = $5,000 each year for three years for a total of $15,000;
      • Share crop rent:  100 acres x 200 bushels per acre x 50% (owner’s share) = 10,000 bushels x $4.50 = $45,000 for owners share x 20% = $9,000 each year for three years for a total of $27,000; or
      • Cow/calf share rent: 100 calves x 50% (owner’s share) = 50 calves x $1000 (value of animal at time of division of calves) = $50,000 x 20% = $10,000 each year for three years for a total of $30,000.
  • Rent to a beginning farmer or rancher to increase retirement options.
  • Ensure the farm or ranch will continue in operation.
  • Paying it forward – did someone help you get started?
  • Cultivate your legacy.

Beginning Farmer/Rancher Eligibility Requirements:

  • Is a resident of the state of Colorado.
  • 51% of income is derived from farming or ranching.
  • Net worth is less than $250,000.
  • Will provide the majority of the daily physical labor and management of the farm or ranch.
  • Plans to farm or ranch full time.
  • Has farming or ranching experience or education.
  • Has participated in an approved financial management educational program.

Asset Owner Eligibility Requirements:

  • An asset owner must be an individual(s) or a trustee, a partnership, corporation, limited liability Company, or other business entity having an ownership interest in an agricultural asset located within the state of Colorado, who is eligible to receive a Colorado tax credit.
  • Must rent to a beginning farmer/rancher who meets the above eligibility requirements.
  • Must be willing to enter into a minimum of a three-year lease with the eligible beginning farmer/rancher.
  • Close relatives are eligible to receive a tax credit if the parties have a written and agreed upon succession plan in place at the end of the lease period to transition the asset between the two parties.
  • Agricultural assets include the following examples:
    • Land
    • Crops
    • Livestock and Livestock facilities
    • Farm equipment & machinery
    • Grain storage
    • Irrigation equipment