Rebates May Increase Taxable Income

At least one major farm input company is stating that rebates are not taxable income. This is incorrect for most farmers. We go over the details.

It appears that some farm input companies are putting out information indicating that a rebate on farm inputs is not taxable income.  The FAQ indicates it is not taxable income which is "technically" correct, but it does incease taxable income if the related expense was originally deducted by the farmer.  This will result in the same amount of taxable income whether you treat it as taxable "income" or simply reduce the related expense.

If this farm input was originally deducted by the farmer, then the rebate will increase taxable income when it is received.  If the farm input was not deducted since it was used for personal purposes (such as use in your garden), then the rebate does not increase taxable income.

The FAQ indicates you should discuss this with your tax advisor, however, many farmers will assume this is correct and will simply pocket the rebate as non-taxable income.  This is not the correct way to handle these rebates.