← FarmCPA Home

Defer the Crop Insurance Payment – MAYBE!

By: | Trackback URL | No Comments

October 13th, 2009

rape-and-cottonwoodSeveral of my farm clients have called me and asked whether receiving a crop insurance payment this year is taxable in 2009 or 2010.  I commonly tell them the answer is yes.  It may be taxable in 2009 or 2010 depending on what type of crop insurance it is and other matters.

In general, if you receive any crop insurance, the proceeds are taxable in the year that you receive them.  However, you can postpone reporting the proceeds to the following year if you meet all of the following conditions:

a.  You use the cash method of accounting for your farm.

b.  You receive the crop insurance proceeds in the same year the crops are damaged.

c.  You can show that under normal business practice you would have included income from the damaged crops in any tax year for the year the damaged occurred.

In brief, if you are a cash basis farmer and you usually sell all or most of your crops in the year after harvest, you should be able to defer the crop insurance proceeds into the next year.  However, if your history is to sell the crops at harvest time or by the end of the year of harvest, then you will not be able to defer the proceeds. 

In order to defer the proceeds, you must actually incur destruction of or damage to the crops.  Agreements with insurance companies that provide for payments based upon a minimum revenue per acre without regards to actual crop losses do not qualify for the deferral.

Some farmers received payments under the Crop Revenue Coverage (CRC) purchased from federal Crop Insurance Corporation.  These payments are based upon price as well as quantity and quality of the crop.  Only the payment for destruction or damage (yield loss) is eligible for deferral.  A farmer receiving these payments would need to calculate the portion related to the crop damage and this would be eligible for deferral.  The remaining part of the payment would need to be reported in the year of receipt.

The University of Minnesota has a very good article regarding how to calculate this and other matters related to the taxation of crop insurance proceeds.  Their article is located here.

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation.

More Posts - Website

Follow Me:

← FarmCPA Home

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe to this blog by:

Previous Posts


View upcoming speaking engagements and other networking events for Paul Neiffer and CliftonLarsonAllen’s agribusiness team.

See All

  • Twitter Feed

    When "bullish" corn reports lead to flat closes what is Mr. Market telling you. Be careful. 1 week ago

    2010 spring corn price was $3.99. Only four years ago. 2 weeks ago

    Two good days to lock in decent prices on corn and beans. Did you take advantage of the opportunity 2 weeks ago

    Very little change on corn intentions in key corn belt state. Almost all reductions in fringe states such as ND down 1 million acre 3 weeks ago

    North Dakota up 1 million Minnesota up 700k and Nebraska up 600k represent almost half of the 5 million increase in bean acres 3 weeks ago

    Just spoke for 45 minutes on new farm bill to a group of 100 Minnesota and Wisconsin Co-op board members. No one fell asleep. 3 weeks ago

    Hard to beat spring time in the Pacific Northwest. 4 weeks ago

    Kansas City can be windy this time of year. Just got done taping with a farm family. Check it out on #agday next Friday 4 weeks ago

    I think spring has sprung in our area. 1 month ago

    April hogs 116 limit up! Can they hit 120 1 month ago