Congress has overridden a presidential veto to enact the Food, Conservation, and Energy Act of 2008, creating $1.7 billion in tax incentives for farmers. Some key provisions that will help farmers and other taxpayers:
To prevent farms from being used as a tax shelter, the new law creates a limit on the use of farming losses. The new law restricts the amount of farm-related losses reported on Schedule F by self-employed farmers that can be used to offset nonfarm income to the greater of $300,000 or the average net farm income during the preceding five years.
One of the key provisions in the new law is a change in disaster assistance. The law creates a permanent disaster assistance trust fund to cover five assistance programs, including the Livestock Indemnity Program for livestock lost to extreme weather conditions. To be eligible for assistance after 2007, farmers must purchase crop insurance.
The law also creates "Aggie Bonds," which are tax-exempt bonds to help finance agricultural improvements. These bonds will provide low-interest loans for first-time farmers and ranchers.
The President had vetoed the law because he believes it lacks fiscal discipline. It provides special-interest earmarks and subsidies at a time when net farm income is projected to increase by $28 billion this year.
Source: H.R. 2419
The difference between amount realized and adjusted basis on the sale or exchange of capital assets. Long-term capital gains are taxed favorably. Capital losses are deducted first against capital gains, and then again up to $3,000 of other income.