Reporting Christmas tree sales using the capital gain method is the best way for most Christmas tree growers to keep more of their profits by minimizing their federal tax liability. In fact, an “average” grower can save $27,782 just by making this simple switch.
The 2020 Christmas season resulted in record-breaking sales for many Christmas tree growers, which could be the beginning of an upward trend for the next few years. Switching to the capital gain method now can put additional money in your pocket this year and every year into the future.
An average grower who switches to the capital gain method this year will have an additional $27,782 this year and every year into the future. A grower can use these additional tax savings to:
- Expand farm (acquire more land, plant more seedlings, etc.)
- Save for retirement
- Pay off debt
- Fund children/grandchildren’s education
- Buy new farm equipment
- Advertise and reach more potential customers
- Take more time away from the farm by hiring another employee
- Hire an accountant to do taxes and/or bookkeeping
- Travel more (for vacation, or even for Christmas tree association meetings!)
Once common question I receive is if a grower can switch to the capital gain method for trees that have already been planted. The answer is yes!
Switching to the capital gain method requires an evaluation of recordkeeping and sales processes to ensure a grower is tracking the necessary data to support the capital gain election. The capital gain method also requires the preparation of additional forms with the tax return and the income from Christmas trees shown in a specific way.
I work with Christmas tree growers in two main ways regarding the capital gain method: (1) full-service tax preparation and planning, and (2) capital gain method implementation consulting.
If you’re interested in keeping more of your hard-earned Christmas tree profits by switching to the capital gain method, contact me today!
