The deadline for the Beginning Farmer Tax Credit applications are due by October 1, 2021. The deadline applies to any transaction taking place in the calendar year 2021.
Due to tuition payment cycles, if a beginning farmer is applying for the Educational Credit only (No Asset Owner Involved), the deadline is November 1.
The Minnesota Beginning Farmer Tax Credit provides tax credits for the rent or sale of farm land or a variety of farm assets to beginning farmers. This includes incentives for the sale of farm land.
A Beginning Farmer is defined as:
- A Minnesota resident (Residency Fact Sheet, PDF) who is seeking entry, or has entered into farming within the last 10 years.
- A farmer who will provide the majority of the labor and management of the farm that is located in Minnesota.
- Has adequate experience and knowledge of the type of farming for which they seek assistance from the Rural Finance Authority.
- Can provide positive projected earnings statements.
- Is not directly related to the owner of the agricultural asset. This includes parents, grandparents, brothers, sisters, spouses, children, and grandchildren. Legal adoption shall be considered in full effect.
- Has a net worth that does not exceed the limit provided under section 41B.03, subdivision 3, paragraph (a), clause (2). This limit is $851,000 in 2021.
The beginning farmer may need to participate in an approved financial management program. Costs of financial management programs up to a maximum of $1,500 per year (for up to 3 years) may also be eligible for a tax credit. The financial management credit need not be tied to any agricultural asset sale or rental.
Definition of “Agricultural Asset”:
- Agricultural land, livestock, facilities, buildings and machinery used for farming in Minnesota
The credit to the agricultural asset owner is as follows:
- 5% of the lesser of the sale price or fair market value of the agricultural asset up to a maximum of $32,000;
- 10% of the gross rental income in each of the 1st, 2nd, and 3rd years of the rental agreement, up to a maximum of $7,000 per year, or
- 15% of the cash equivalent of the gross rental income in each of the 1st, 2nd, and 3rd years of a share rent agreement, up to a maximum of $10,000 per year.
The agricultural asset owner can claim credits in one of the above categories in a given tax year on a per beginning farmer basis up to the maximums stated.
Role of the Rural Finance Authority (RFA)
The RFA will administer the tax credits by:
- Certifying beginning farmers
- Assisting beginning farmers with locating eligible financial management program options in their area
- Certifying that owners of agricultural assets are eligible for the tax credit. This is a first come, first served initiative. The amount available in 2021 is about $12 million.
The asset owner may be an individual, trust, a qualified pass-through entity. The owner of agricultural assets cannot be an equipment dealer, livestock dealer, or comparable entity engaged in the business of selling agricultural assets for profit.
