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Farmers and ranchers often pay for feed, supplies, fertilizer, and other inputs in one year and use those items in the following year. They may do so to pay lower prices, guarantee availability, for planning purposes, and/or other reasons.
The Internal Revenue Code allows qualified farmers and ranchers (farm-related taxpayers) to deduct the costs of such purchases in the year that the purchases are made rather than the year in which such items are used. Generally, the deduction for pre-paid farm supplies is limited to 50% of other deductible farm expenses (all schedule F deductions except supplies) for the year.
Rural Tax Education
prepaid, farm, expenses, finance
Education | Higher Education | University Extension
Tranel, Jeffrey E., "Prepaid Farm Expenses" (2012). Rural Tax Education. 9.