Commodity & Livestock Giving

Are you a farmer who financially supports non-profit organizations that are meaningful to you, such as churches, schools, and other charities committed to serving others and spreading the Gospel? Do you support them by writing checks? Here’s what’s really happening: the commodity or livestock is sold, income and self-employment taxes are paid on the profits, and then the donation is made from after-tax profits.

There’s a simple way to make that donation go much, much further: donate the commodity/livestock directly to charity! The sale will not be reported on your tax returns, and yet you can still claim the cost of production as an expense on your tax returns (assuming you use cash basis accounting).

Let’s use an example: Ted Vander Jones, an area farmer, age 55, is in the 25% federal tax bracket. Self-employment taxes are at 15.3%, and state taxes are at 5%. Ted has 3,000 bushels of corn with a value of $12,000. His costs of production were $3,000. If he sells the corn for $12,000, he has a $9,000 profit after costs of production, and he has to pay taxes on that of roughly 45%, so he’d be left with only about $5,000 to give to charity out of that $9,000 profit.

In 2015, Ted decides to give a $12,000 gift of commodities to his favorite charities. Ted pays no taxes on the $12,000 and he can use the $3,000 cost of production as a deduction to offset other farming income, resulting in a tax savings of roughly $1,350. So the overall tax savings difference between the two scenarios is $5,400 in this example. His $12,000 gift really only ‘cost’ roughly $6,600! Or, looking at it another way, the charity received $12,000 instead of $5,000, an increase of 140%, more than doubling the impact!

Ted may be eligible for a charitable deduction resulting in tax savings of roughly $1,584, but only if he itemizes deductions.
THE BOTTOM LINE: Tax savings allow your donations to go further!

There are some special steps to donating a commodity or livestock:
1) Check with the charity to make sure they are equipped to handle this kind of gift. They may have a form for you to fill out.  Note: Bethel CRC is equipped to receive these gifts, but does not require a form.
2) Deliver the gift to the elevator or stockyard/sale barn, inform the staff of the gift, and ask them to issue a receipt in the name of the charity.  
3) Inform the charity of the gift (if you haven’t already done so). The charity, then, has control of the commodity/livestock and may sell whenever they wish. The charity should issue you a letter acknowledging receipt of the gift.
Questions? You should talk with a financial professional/tax accountant before taking action. You may also contact one of the Deacons or a member of the Stewardship Committee.