CONGRESS READIES RURAL AMERICAN TAX RELIEF
Fragile farm economies in rural communities wouldreceive a helping hand for saving and investments in the taxpayer relief measure approved 237 to 174 in the U.S. House of Representatives on
Thursday, and readied for this week's vote in the Senate.
Producers, as self-employed workers, would be able to take a full deduction on the cost of their health insurance premiums in the next tax year, permitted to invest and save with tax-free withdrawals from interest-bearing accounts, and benefit as intended from income-averaging of poor crop years against the bumper crops.
"This taxpayer relief offers producers a way to manage the financial
inputs of heath insurance, savings and crop income into next year's farm plan," said Combest. "They would certainly welcome such a helping hand at tax time."
"The Taxpayer Relief Act of 2000" (H.R. 2614) as adopted by the
House on Thursday, contains three provisions helping farmers and ranchers:
1. Beginning after Dec. 31, 2000, self-employed individuals may
deduct 100% of the costs of health insurance. Recent changes in the tax code provided for a phased-in increase in the allowable deduction that may be taken for the costs of health insurance. However, this measure provides a full deduction beginning in the next tax year.
2. Authorizes "FFARM" Accounts (Farm, Fishing, and Ranch Risk
Management Accounts). Eligible producers may deposit up to 20 percent of taxable income per year into an interest bearing account to be used as a "rainy day" account. Balances in the account must be dispersed within five years of establishing such an account. Although earnings would be taxed in the year they are received, any withdrawal from the account would be treated as coming from the previously taxed earnings received on the account. Deposits in the account also would not be subject to the self-employment tax.
3. Corrects a problem with income averaging in which some farmers or fishermen may be subject to the alternative minimum tax, because
good crop year incomes distort the true taxable income of producers
financially struggling through poor crop years.