Schedule J (Form 1040) Income Averaging For Farmers And Fishermen 2023-2024

Schedule J (Form 1040) Income Averaging For Farmers And Fishermen: What You Should Know

What does income averaging for Farmer and Fishermen do for 2017? There should be no reason that this should even be an issue for some farmers, but it was recently announced by the Secretary of the Interior that income averaging for Farmer and Fishermen is coming to an end for 2017.  So for 2024 the “taxable income” will be adjusted after it has already been calculated.   So for the 2024 tax year, we are going to do what's called the reconciliation process with the IRS. The IRS will “recalculate” your tax liability for 2024 and compare the results to the calculations (as of  the previous year) from your personal returns.   You can see from the table above that the “adjusted ordinary farm income” for 2024 was 37,000 and adjusted farm income was 34,050. (This will be adjusted again after September 1, 2017.)  So if you do not want this to happen, then you will need to report an additional 1,500 this year. But the most important reason to do it is that for 2017, this election to average income would result in no refund and an additional 10.3% Medicare tax.  This income averaging would mean you would only be able to deduct  your own tax and any amount over and above that deductible. This is good news! If you have a lot of deductions, it will actually mean you will actually only get to deduct 1/4 of that amount.  That means you could have as little as 9,900 of income in your taxable income and still qualify for the 15% income tax rate. It is important to note that although this is now going to end, the average farm income of 35,565 for 2024 will remain.  It is not changing to 35,000, but that is how they will treat it if you average, and you have the option. The IRS will continue to adjust it, and we will not be able to file for a refund the way we have until September 1, 2017. So just for 2018, let's do it and let's try and get the tax deduction we can for that extra 1,500 after accounting for what they are counting as the normal farm income. I will just make that the normal farm income and just use the difference between the actual and average as my own deduction amount.

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