Issuu

Leader

An AgChoice Farm Credit Member Publication

Supporting Young, Beginning and Small Farmers

SUMMER 2021

Growing a New Generation of Farmers.

is published quarterly for stockholders, customerowners, directors and friends of AgChoice Farm Credit. PRESIDENT Darrell L. Curtis

$10,000

BOARD OF DIRECTORS Richard A. Allen, Chairman Christine Waddell, Vice Chairman Kevin D. Grim Steven H. Gross, Jr. William K. Jackson Paul Schmidt Richard D. Shuman Dennis B. Spangler Charles F. Ulmer Shawn D. Wolfnger Samuel BowerCraft, Appointed - Outside Director Larry A. Seibert, Appointed - Outside Director Kristi Yacono, Appointed - Outside Director

startup grants*

EDITOR Carrie Bomgardner

Apply for one of our ten

2020 PPP BORROWERS: APPLY FOR LOAN FORGIVENESS THIS SUMMER

ndividuals and businesses who received a Small Business Administration (SBA) Paycheck Protection Program (PPP) loan in 2020 will want to apply for loan forgiveness this summer if they haven’t done so already. According to regulations, borrowers have up to 10 months after the end of their covered period to apply for forgiveness. Since most PPP borrowers should use a 24-week covered period, this is about 16 months from the time the loan was received.

complete SBA Form 3508S, a shortened forgiveness application. Borrowers with loans greater than $150,000 will complete either SBA Form 3508 or 3508EZ, depending on criteria. Learn more about the applications and what’s included by viewing AgChoice’s PPP loan forgiveness educational videos at agchoice.com/SBALoans. Any borrowers who received a PPP loan in 2021 should wait to apply for forgiveness until after their 24-week covered period.

During the coming months, AgChoice will work with borrowers who should apply for forgiveness. Borrowers with loans $150,000 and less will

PUBLISHER AgFirst Farm Credit Bank

If you’re a startup farmer in the AgChoice territory with a full- or parttime agricultural business, we’re here to help you succeed! Visit www.agchoice.com/grow to submit your application by August 31

PUBLISHING DIRECTOR Jenny Grounds DESIGNERS Joey Ayer Phereby Derrick PRINTER Sun Solutions Address changes, questions or comments related to the Leader may be directed to: Carrie Bomgardner | AgChoice Leader Editor AgChoice Farm Credit 300 Winding Creek Blvd. | Mechanicsburg, PA 17050 phone: 800-349-3568 ext. 6019 email: cbomgardner@agchoice.com Requests for copies of our fnancial reports and inquiries related to internal control, auditing and accounting should be directed to: Ann Metzler | Audit Committee Recording Secretary AgChoice Farm Credit 1434 Seven Valleys Rd. | York, PA 17404 phone: 800-822-1218 ext. 4206 email: ametzler@agchoice.com

On the cover: Larry and Ashley Latta, Tuckaway Tree Farm, share their experiences with beginning farm ownership on pages 8-9. Cover photo by Ashley Mohn

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N M L S #645693

*Offer valid for startup farmers with operations started within the past two years or those who plan to start one in the next two years. Applications accepted through Aug. 31, 2021. Please visit agchoice.com/ grow for complete details and to apply.

Reports of suspected or actual wrongdoing involving the Association, its employees, directors or agents can be made anonymously and confdentially through the Association s whistleblower hotline (Convercent) at 1-844 850 6491 or online at www.convercent.com/report.

In this issue... Message from the President

Growing the Next Generation of Farmers . . . .

Feature Story

Green Dreams at Tuckaway Tree Farm . . . . . .

Association News

2022 Calendar Contest; Field Notes Podcast; Bigger Referral Rewards . . .

Feature Story

Technology Opens Doors for Young Farmer . . . . . . . . .

Education Corner

The Soaring Costs of Land and Lumber; Capital Gains Tax – Better or Worse? . . . . . . . . . . . . . . . .

6 Summer 2021 | AgChoice Farm Credit > 3

Message from the President

Association News Look for our calendar winners and vote for your favorite in July. We’re busy selecting and notifying our 2022 calendar photo winners. Many thanks to everyone who entered! Keep an eye on our Facebook and Instagram for winner announcements and an opportunity to decide who earns top honors. Cast your vote by liking your favorite on social media (@agchoicefarmcredit).

DARRELL CURTIS

Growing the next generation of farmers

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_a ew things at AgChoice are more important than helping the next generation begin a successful farming career. For our directors and AgChoice employees, this opportunity to help new farmers realize their dreams is personally extremely gratifying! It is also rewarding to employ our lenders, farm accountants and consultants to assist the current generation of farmers who are ready to transition out of the business to find and position their successors.

Your AgChoice team has enthusiastically built and grown strong programs to beneft young or beginning and small (YBS) farmers. We’re excited about the new YBS program in 2021 that I’ll overview at the end of this article. First though, I’d like to introduce a young couple starting their farming life’s work. Tifany and Mack Kline Tifany began milking cows when she was just 12 years old on her family farm. While she started with a few chores, her parents slowly allowed her more responsibility, helping her to realize that farming was her life’s calling. When Tifany met Mack, a fellow farm kid, the rest was history. Mack and Tifany soon started to plan for their future together. In November 2019, they moved forward with their dream to buy a farm of their own. They made their frst appointment with their AgChoice loan ofcer and began the process of purchasing a farm.

After closing on their Williamsburg, PA dairy farm last April amidst the upheaval of the pandemic, Mack and Tifany look forward to their future.

Loan & Service Savings AgChoice loans: Up to 0.25% rate discount, up to

“On this farm, what excites us the most is the fact that there’s so much to be improved as we make this farm our own,” Mack said.

$250 off loan origination

fees, relaxed credit standards and coverage of first year fees for FSA or

other government loan guarantee.

Tifany agrees. “Coming into this, we had a lot of big dreams and big things that we wanted to do. So now that we’re fnally the owners and we can do those things, we’re excited to get started on our future here,” she said. Along the way, Mack and Tifany benefted from our YBS programs. They graduated from AgBiz Masters, featuring fast-paced business and fnancial courses that included guidance on developing their farm business plan. They also earned some AgChoice loan rate reductions for completing the program. If you’re interested in learning more about the Klines, visit our agchoice.com homepage to watch their video. Scan the code here:

Highlights of our YBS programs Our directors and employees are passionate about our mission to support the next generation of farmers. Like you, we are committed to a bright future for agriculture and rural Americans. Following is a summary of the benefts we ofer to YBS customers to achieve their farming dreams.

AgChoice services: Up to $500 off AgChoice

appraisal, recordkeeping, tax and business consulting services.

Educational Opportunities

Offerings: Two-year AgBiz Masters blended learning program available to hone your business and

Discounts: Up to $250 off AgBiz program or other

industry-provided educational opportunity, plus up to $10,000 grants to help YBS farmers jumpstart their business.

' Starting up or acquiring a farm in 2021 isn’t easy. YBS farmers face many challenges that could include limited equity compared with the high costs of farm assets, or possibly a lack of fnancial or business acumen. Our lenders and accounting and consultant staf can help YBS customers take advantage of these programs, while also ofering a sounding board when asked. We are excited and honored to help our future agricultural and rural businesses start out and grow. Thank you for the opportunity to serve you!

Darrell L. Curtis President and CEO

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financial management

skills, plus AgBiz Basics online, a two-hour virtual program to assist with your farm business plan.

Field Notes Podcast Listen at agchoice.com/podcast or wherever you fnd podcasts. Our staf and special guests discuss timely topics relevant to PA’s ag and rural communities on our FIELD NOTES podcast. Follow along each week to hear from other farmers, rural residents and industry experts.

Refer new customers to AgChoice in 2021 and you’ll be entered to win a $250 gift card in addition to the $50 one you receive for supporting our cooperative’s growth.*

Are you a young, beginning or small farmer? Use these recent educational episodes as resources on your business journey:

•

Episode 58: PA Farm Link Connects Farmers and Landowners

•

Episode 53: PA Tax Credit Helps Farmers Get Started

•

Episode 51: Your REAP Questions Answered

Contact your local team to share your referral today. *To receive a $50 gift card, you must be an active AgChoice loan or business services customer. Your referral must yield a new, closed loan or business service contract. Loans subject to RESPA, crop insurance contracts and AgChoice Farm Credit directors and employees are not eligible for referral gifts. To be eligible for the $250 grand prize, the new loan or business service contract must close between January 1, 2021 and December 31, 2021.

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LISTEN ON OR WHEREVER YOU FIND PODCASTS

4 << Summer 2021 | AgChoice Farm Credit

Reap the Rewards and Turn Your Referral into a Bumper Crop

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Feature Story Farmer Fridays In the summer of 2020, a teaching door opened for William, combining his love of technology and his public speaking skills. “A Slippery Rock University hospitality professor asked our local Farm Bureau to help find a farmer to talk to her students,” said William. “I volunteered. You can’t let opportunities to share your farming story go to waste.” “She knew her hospitality industry students needed to know where their food comes from,”

he continued. With the Zoom video platform, William brought the Slippery Rock students to his farm every Friday for eight weeks over the internet. “I shared a different subject each week, and I called it Farmer Friday,” explained William. Topics included soil health, cover crops, machinery, the milking process and cattle feed. After a popular first semester, William returned for the class’s spring semester to share his farm with a new group of students.

William understands that many farmers are afraid to talk to the public. “I get it,” he said. “But we need to be more open-minded about the public. We can’t aford to write people of. If the public has a genuine interest, go for it. Now, we can even talk virtually to people about agriculture. It’s doesn’t take much time, very little efort and you’re talking about something you love – farming.”

Ask the #droneguy How can I use a drone on my farm?

Technology Opens Doors for Young Farmer

or William Thiele, a sixth generation B u t l e r Co unt y dair y f ar m e r, an un e xp e c te d Chr is tmas gi f t an d its agricultural applications opened new leadership and educational opportunities.

The #DroneGuy Takes Flight “My parents gifted my brother and I a drone in 2015,” William remembered. “It was a basic model, but my parents saw on T V that you could do ag stuff with a drone.” It was a perfect ft for William. “I’ve always enjoyed learning new things, especially with technology.” After watching helpful YouTube videos, William took the Christmas drone on its maiden fight. “I f lew around and made videos of the landscape that winter and realized it would be helpful in the spring,” recalled William. “You gain a different perspective of your fields from the air than on the ground.”

While William honed his drone skills, he also became more involved with Pennsylvania Farm Bureau’s (PFB) Young Agricultural Professionals (YAP) group. His local Butler County Farm Bureau chapter hoped a demonstration event of a drone’s agriculture applications, such as viewing cover crop stands or deer damage, might draw more young people in April 2016. It was a success. “That one little demonstration started a snowball efect that keeps getting bigger,” said William. Over time, William continued speaking at events and performed more drone demos at both the PFB and American Farm Bureau annual meetings. “ That ’s how I got my name, #droneguy,” William shared. “Even a few years into my demonstrations, around 2017, many people didn’t understand how to use drones and they were fascinated. I started using #droneguy with my video uploads.”

Check cover crop stands in the spring and feld crops through the summer. The drone gives you an honest view of wet spots, deer damage, etc. If felds look decent in the air, they’ll look very good on the ground. Is the corn making ears? Do you need fertilizer?

Check livestock. Fly over pastures to access any animals with problems.

Monitor farm acreage for deer, groundhog or storm damage. Flying beats driving your ATV or your Gator to fnd the damage on your farm.

William’s social media drone videos, including his focus on cover crop applications, caught the Pennsylvania No-Till Alliance’s attention. “I look at our rye cover crop that we plant after soybeans, when things start greening up,” he explained. “I can easily see which felds have the best stands.” “I was invited to speak at a few of the No-Till Alliance’s summer Field Days and today, I serve on the Alliance’s Board of Directors,” shared William. “My drone leads me into talking about agriculture, which leads me to talk about conservation, and that snowball opportunity keeps getting bigger.” This winter, William added another speaking opportunity to his resume. He shared his experiences in the AgChoice AgBiz Masters program with current participants. A 2018 AgBiz Masters graduate, William said, “AgBiz makes you think about the various aspects of your farm business and strive to do better.” Photos courtesy of William Thiele

6 < Summer 2021 | AgChoice Farm Credit

Summer 2021 | AgChoice Farm Credit > 7

Feature Story insects. Larry also learned to monitor for weeds and tree damage caused by deer and other pests. “We want to understand every process frst before we hire others to help us,” said Larry. “We also want to slowly add more equipment.” In addition to the fve native evergreen varieties on the farm - Douglas Fir, Concolor Fir, Balsam Fir, Canaan Fir and White Pines - Larry and Ashley planted assorted shade and ornamental trees for the balled and burlap landscaping live tree market. “We went to Tennessee earlier this year and filled our big blue trailer with crab apple, flowering pear, lilac, dogwood, ironwood, maple and redbud trees,” said Larry.

Green Dreams at Tuckaway Tree Farm 11111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111

n elementar y school, Larr y Lat ta documented his career dreams. “I want to be a tractor driver,” the aspiring farmer wrote. With the purchase of Tuckaway Tree Farm, McAlevy’s Fort, Huntingdon County, last summer, Larry’s dream became his reality.

“ I ’m f i n a l l y w h e r e I a m su p p o s e d to be,” shared Larr y. “I love the dir t and it’s so fun to see everything come alive this spring. It ’s ver y rewarding to see the entire growing cycle this first year.” Timing is Everything Larry and his wife, Ashley, first drove by Tuckaway Tree Farm in 2013, while exploring the area surrounding th eir we d din g venu e. “ We l ove d th e property, the farm’s name and even the little truck in the old logo,” remembered Larry. Ashley’s grandfather was friends with Bob, the owner of the 40-year-old wholesale and retail evergreen farm, and he coordinated a meeting in 2015. “At the time, Bob hadn’t planted any trees in five years as he was phasing out,” Ashley said. “With trees’ long life cycle before retail, we knew it wasn’t feasible to purchase the farm. We put the idea out of our head.”

•

e habitat. One acre of a While growing, trees provide oxygen and wildlif oxygen in a year. That same of s pound 000 1, ce produ can farm tree as Christm e. dioxid carbon of s pound 500 mes one acre also consu are fully recyclable. Larry After the holiday, your tree doesn’t fll a landfll. Trees as trees on the farm to Christm old chip ay somed to ng planni are and Ashley trees. as Christm g mulch the growin

“ We b o u g ht a l i t t l e b i t o f e v e r y t h i n g ,” explained Ashley. “ The trees will grow for two to three years and then we’ll dig them up to sell.” With the shade and ornamental tre es, the f arm now hos t s 15,0 0 0 tre es . “Our goal is to make the farm more of a retail destination and add a store,” Ashley continued. “We want people to experience the farm.”

Larr y and Ashley also are learning about managing their business with AgChoice’s AgBiz Masters program. “Even though I earned an accounting degree, farming is very different,” smiled Larr y. “AgBiz is a good foundation to think in g ab o u t mana gin g o ur f ar m .”

Fast forward to Thanksgiving 2019. After dinner, Ashley cruised Zillow, the online real estate marketplace, and was surprised to find a familiar listing – Tuckaway Tree Farm.

Learning the Ropes For Larry and Ashley, 2020 was a year of learning on their farm. “It was difficult because we also were going back and forth to Pittsburgh before we sold our home and transitioned to the farm fulltime,” recalled Ashley. “Our friends thought we were taking social distancing to the extreme!”

•

As they wait for their trees to mature for retail sale, the couple is considering other farm revenue streams. This summer, Ashley plans to offer ornamental trees from other local growers and possibly cut fowers, followed by fall pumpkins and fnally, wreaths and pre-cut trees for the holidays.

For the next four years, Larry and Ashley continued with their careers in the greater Pittsburgh region, but they longed for more space and an opportunity to live closer to Ashley’s family.

“We knew we had to tr y to buy it,” recalled Larry. Larry, Ashley and Bob met again over Christmas and with fnancing from AgChoice, closed on the 36-acre farm in May 2020.

Live Christmas Trees: A Green Choice

A regional drought challenged the farm within months of purchase. “Now, we’re ready for the next dry period,” Larry shared. “We have a transfer pump, filling totes and a gravity feed for the newly planted trees.” With Bob’s guidance, Larry began learning how to care for the trees. “We will touch every tree in some way, at least once per year from pruning to spraying to watering,” he explained. After buds start breaking in the spring, spraying becomes important to control

“And for me, I really love hearing about fe ll ow AgB i z s t u d ent s ’ s to r i e s an d t h e businesses they are launching,” said Ashley. As they celebrate one year of farm ownership, the couple is thankful for the opportunity to work together. “Ultimately, we’re so glad we get to keep this farm going,” explained L a r r y. “ W e d o n ’ t n e e d m o r e h o u s i n g developments; we do need more green spaces.” Follow Larr y and Ashley’s adventures on Instagram and Facebook @tuckawaytrees or visit tuckawaytreefarm.com. Photos courtesy of Ashley Mohn

8 < Summer 2021 | AgChoice Farm Credit

Summer 2021 | AgChoice Farm Credit > 9

Education Corner

CAPITAL GAINS TAX – BETTER OR WORSE?

The Soaring Costs of Land and Lumber

Kenny Nearhoof, Senior Accounting Officer 111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111

ost of my clients react to the term “Capital Gains” during tax planning with disdain or at least frustration. I think the reason is a large tax bill often accompanies it, usually because they are selling a high priced asset that is subject to this type of tax, like real estate. Well, I am here to set the record straight: Capital Gains Tax is the preferred tax to pay!

Thad Taylor, Director of Agribusiness Lending

. ising real estate prices are all over the news, with reports of homes selling well above asking prices. A similar phenomenon is happening to farmland and timberland tracts, impacting many farmers and forest products operators. Record high lumber prices are also causing challenges across the state, especially with construction projects. Overview

To understand the reason for these rising costs, look to supply and demand. For buyers participating in today’s real estate market, expect to pay more for your property compared to two years ago. Thanks to the pandemic, many businesses’ employees now work from home, no longer tied to an office location. That’s changing demand in certain areas, especially in rural communities. The other factor is supply. What brings properties to the market and causes sellers to list with a realtor? If there’s any uptick in demand for additional listings, that can change pricing, at least in the short-term. While oversimplifed, one of the things we know about the pandemic, as with any significant economic event, is that not all sectors or individuals experience it exactly the same way, positively or negatively. In response to additional liquidity making its way into the US equity markets, the Dow up 34% year-over-year and afordable interest rates, more people are entering the real estate market.

Real Estate Impacts When buying and borrowing money for real estate today, comparable sales used for appraisals might lag behind today’s market because appraisals depend on historical comparable sales. If a construction appraisal uses comparable sales from 2019 and 2020 to make an appraisal today, those historic sales prices will drive the appraised value. As a result, a lender may not want to lend upon the entire purchase price, but a more conservative evaluation that relies on the appraisal. Buyers can expect to cash fund a higher portion of their purchase because today’s appraisals might not support today’s asking prices. There usually is a lag between when real estate sales occur at an elevated or depressed price and when the appraisal comparable sales ultimately catch up with that market trend. Lumber Impacts The most recent southern lumber prices for softwood are about 192% above a year ago. That’s a significant rise in softwood lumber prices, and softwood is the material that’s used to frame and build houses. Hardwood lumber, on the other hand, makes its way into molding, fooring and trim in most residential construction. Softwood lumber, this article’s focus, drives construction costs for houses, barns, second homes, cabins, etc. Those prices are up about 192% year-over-year, impacting the estimate and construction cost for any new project.

10 < Summer 2021 | AgChoice Farm Credit

COMPARING CAPITAL GAINS AND ORDINARY INCOME

Ultimately, the increased prices come down to supply and demand, too, although the amount of softwood standing timber in the United States isn’t driving supply. Instead, it’s driven by the weakest link in the supply chain, including mill capacity, trucking capacity, warehousing capacity, planing mill capacity and kiln drying capacity. Those various links synchronize for the industry’s supply chain to deliver what’s demanded on time. In this case, the industry can’t quickly adapt to any capacity weak links. What can change quickly is consumer behavior. If consumers stockpiled future projects in their mind and in their bank accounts, they can quickly deploy that pent up demand when they decide to start the project and open their checkbooks. We anticipate lumber prices starting to fall back in line with historical levels somewhere in the next 12 to 18 months.

Per Investopedia, “Capital gain is an increase in a capital asset’s value and is considered to be realized when the asset is sold.” The Economic Times goes a bit farther with the following defnition: “Capital gain is the proft one earns on the sale of an asset like stocks, bonds or real estate. It results in capital gain when the selling price of an asset exceeds its purchase price. It is the diference between the selling price (higher) and cost price (lower) of the asset. Capital loss arises when the cost price is higher than the selling price.” What is the diference between capital gains income and ordinary income? Back to Investopedia: “Ordinary income is any type of income earned by an organization or an individual that is taxable at ordinary rates. It includes (but is not limited to) wages, salaries, tips, bonuses, rents, royalties and interest income from bonds and commissions.” When it comes to your farm or other business, the income you generate on a daily or consistent basis is typically ordinary income except for some raised livestock sales that receive capital gains treatment.

The rewarding challenge for an AgChoice accounting ofcer is helping you “tax plan” strategic asset sales with your ordinary income to fnd a balance you like in your “tax measuring cup.” Reach out to a team member for further advice and service. Based on 2020 Federal Tax Rates for Married Individuals Filing Joint Returns Example 1 Capital Gains Rates

Tax%

$ of Income

15% 15% 0% 0% 0% 0%

$ 120,000.00 $ 100,000.00 $ 80,000.00 $ 60,000.00 $ 40,000.00 $ 20,000.00 $ 40,000.00 $ 40,250.00 $ 19,750.00 $ 100,000.00

For practical and general application, assets that do not receive the benefit of depreciation are generally assets that do receive Capital Gains Tax treatment, like bare land. Some depreciable assets will receive Capital Gains Tax treatment if the assets sell above their original cost (like a pre-1995 John Deere tractor), and only that portion above the original cost will receive Capital Gains treatment. For these reasons, Capitals Gains Tax is actually preferable over ordinary income. But what happens when you have a mix of both types of income? Let’s take a common liquid measuring cup. On one side, you can measure ounces and cups, and on the other side, you can measure milliliters. Your income with a mix of capital gains income and ordinary income is the same way. •

If a person does need to move quickly and can’t aford to potentially lose out on an opportunity, it makes sense to participate in this market, especially if there aren’t other alternatives. However, given the speed with which the market has risen and given some of the overall economic liquidity factors behind it, there might be some beneft to being patient.

income and $60,000 of ordinary income for a total tax of $9,175. In the second example, this swaps: $60,000 of capital gains income and $40,000 of ordinary income for a total tax of $6,775. The last visuals show the $100,000 as either all ordinary income, for a total tax of $13,580, or all capital gains income, for a total tax of $3,000. Capital gains in terms of these examples is looking at Long-Term Capital Gains on assets held for the required time period for this tax treatment.

On one side, you have Capital Gains Tax rates of 0% (yes, that is a zero!), 15%, 20% and 23.8%. °

•

For a Married Couple filing a Joint Federal Tax Return in 2020, the first $80,000 of capital gains income is taxed at 0%, then 15% from there up to $496,600 and then 23.8% for capital gains income above that. On the other side - Ordinary Income Tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%.

For a Married Couple fling a Joint Federal Tax Return in 2020, the frst $19,750 in taxed at 10%, 12% from there up to $80,250, 22% up to $171,050, 24% up to $326,600, 32% up to $414,700, 35% up to $622,050 and then anything over that is 37%.

Example 2 Capital Gains Rates

Tax%

$ of Income

15% 15% 0% 0% 0% 0%

$ 120,000.00 $ 100,000.00 $ 80,000.00 $ 60,000.00 $ 40,000.00 $ 20,000.00 $ 60,000.00 $ 20,250.00 $ 19,750.00 $ 100,000.00

Married Couple: $100,000 $40,000 Capital Gains $60,000 Ordinary Income The Tax Measuring Cup

Ordinary Income

Capital Gains Income

Taxed at 0% Taxed at 12% Taxed at 22% <- Total Income Tax, Total Tax -> Effective Tax Rate:

Married Couple: $100,000 $60,000 Capital Gains $40,000 Ordinary Income The Tax Measuring Cup

...

Ordinary Income

... Capital Gains Income ... Taxed at 0% Taxed at 12% Taxed at 22% <- Total Income Tax, Total Tax -> Effective Tax Rate:

If all $100,000 was ordinary income $ 19,750.00 Taxed at 0% $ 60,500.00 Taxed at 12% $ 19,750.00 Taxed at 22% $ 100,000.00 <- Total Income Tax, Total Tax -> Effective Tax Rate:

Ordinary Income Rates

$ of Income

Tax%

$ 120,000.00 $ 100,000.00 $ 80,250.00 $ 60,000.00 $ 40,000.00 $ 19,750.00

22% 22% 12% 12% 12% 10%

$ 4,830.00 $ 4,345.00 $ 9,175.00 9.18%

Ordinary Income Rates

$ of Income

Tax%

$ 120,000.00 $ 100,000.00 $ 80,250.00 $ 60,000.00 $ 40,000.00 $ 19,750.00

22% 22% 12% 12% 12% 10%

$ 2,430.00 $ 4,345.00 $ 6,775.00 6.78%

$ 1,975.00 $ 7,620.00 $ 4,345.00 $ 13,580.00 13.58%

If all $100,000 was capital gains income

In general terms for this illustration, you always fll your “tax measuring cup” with capital gains income frst and then ordinary income on top. In the table, pretend the middle portion is the measuring cup and the sides are the measurements. This married couple has taxable income of $100,000. In the frst example, they have $40,000 of capital gains

$ 80,000.00 $ 20,000.00 $ 100,000.00

Taxed at 0% Taxed at 15% <- Total Income Tax, Total Tax -> Effective Tax Rate:

$ 3,000.00 $ 3,000.00 3.00%

Summer 2021 | AgChoice Farm Credit > 11

□

♦AgChoice

PRSRT STD U.S. POSTAGE

Farm Credit

PAID

300 Winding Creek Blvd. Mechanicsburg, PA 17050

COLUMBIA SC PERMIT 1160

Growing Your Business Is Our Business. Take

25%* off when you add a new accounting or consulting service!

Sound fnancial management is key to growing your agricultural business. Call us today to see how our advisers can work with you!

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*Offer expires Dec. 31, 2021. New in-house records or payroll service customers will receive a one-time $250 gift card instead of a 25% off discount. Please visit agchoice.com/grow for complete details. N M L S #645693