by Austin Weaver

With 2024 around the corner, New York state farmers need to start thinking about the Farm Overtime Credit that will provide a refund for hours worked between the thresholds set by the state and 60 hours.

The table below outlines eligible hours, which for 2024 will be four hours:

Here are important details farmers need to know:

Here is a practical example of how to use the tax credit to your advantage:

In 2024, an eligible farm employee worked 59 hours a week. The rate was $15 an hour, $22.50 overtime. The calculation for that week would be 118% multiplied by three hours (56 to 59 hours) multiplied by $7.50, which is the additional cost of the overtime wage. The overtime during this period would be $26.55.

Assuming this was the only employee on the farm, and they worked 50 weeks during the year with three hours of overtime each week, the annual overtime credit would be $1,327.50. In this example, the farmer then chose to forgo the advanced payment and chose to receive the credit when he files his 2024 income tax return. To the extent that he has other credits that offset New York state income tax, such as the investment tax credit, he will receive the $1,327.50 overtime credit as a full refund.

Other important notes

Keep in mind that in 2024, this tax credit will be considered federal taxable income to the farmer.

To be an “eligible farmer” for the tax credit, it means that you must derive two-thirds of your gross income from farming. New York state has a lot of calculation worksheets available to help people in determining their eligibility.

The farm’s entity structure will also affect how the credit is allocated, and to whom the funds “belong.” Pass-through entities will flow the credit out along with all the items of income-expense, so it will be received at the personal level. Like all other business credits received, they become a component of personal taxable income for the tax year it is received.

A C corporation, on the other hand, would receive the credit at the entity level since the entity itself is a taxpaying entity.

More information on the tax credit is available on the New York State Department of Taxation and Finance website.

Weaver is a Farm Credit East tax specialist from Burrville, N.Y.

Source: Farm Credit East