are crop insurance proceeds taxable
You generally include that income in the year received. Crop insurance includes the crop disaster payments received from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. You can postpone reporting crop insurance proceeds as income until the year following the year the damage occurred if you meet all the following conditions: 1  You use the cash method of accounting. 2  You receive the crop insurance proceeds in the same year the crops are damaged. Code Section 451(d) provides that, under certain circumstances, crop producers reporting on the cash method of accounting may elect to include crop insurance and disaster payments in income of the tax year following the taxable year of crop destruction or damage. Cause of destruction or damage of crops and the date(s) of such occurrence(s). Total amount of payments received from insurance, itemized with respect to each specific crop and with respect to the date of each payment. Name(s) of insurance carrier(s) from whom payments were received. The election may be made on an amended return. Generally, farmers are able to establish their practice of reporting crop income in a following taxable year by reference to their prior year's sale records. In order for a payment to constitute insurance for the destruction of or damage to crops, the insured must suffer actual physical loss. As the 2014 tax year draws to a close, many farmers may still be sitting in a year of high income. One possible way to defer some of this income is to look at crop insurance proceeds received in 2014. Weather variability is one of the largest sources of risk in agricultural production. Congress has recognized the impact of weather variability on crop production and the resulting variability to farm income by implementing a special tax provision. John Farmer operates a grain farm and uses the cash method of accounting. During 2008 John received the following amounts of insurance proceeds for the damage caused to his crops by a June 20th hailstorm: corn $25,000, soybeans $20,000 and wheat $5,000. 1 You use the cash method of accounting. 2  You receive the crop insurance proceeds in the same year the crops are damaged. 3  You can show that under normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Crop insurance proceeds that are received in 2014 for crop production losses may qualify to be deferred until 2015 if the farmer’s normal business practice is to collect 50 percent or more of the crop sale proceeds in the year after harvest.
Yes