Why do people have cattle if its so unprofitable?

[Texans42]

It's not that difficult. Some people get a minimum amount of cows just to keep their land in ag exemption. Especially for small "Ranchette" type places. If running a small herd on your 20 acres costs you $2k per year, but it drops your taxes $5k per year. You saved $3k. (not accurate numbers, just an example)
Beats paying taxes on 20+ acres that is not in Ag ex.

Your mileage may vary.....

You can put a food plot in and hay it and get ag ex. In the Grand scheme farming/ranching isn’t a true tax break. The land is more of a tax deferral, all your depreciating assets eventually comeback around.

Every business has depreciating assets, and deferrals.

[Burnadell]

Big tax write off. The whole ranch, land and equipment, etc. is put in a Corp., LLC or whatever.

Please explain how losing money can make one money because the operation is in some form of corporation.

[sbushee]

It depends on how the operation is run. I do fairly well with mine since I don't lease any land. I run a lot fewer head per acre than everybody around. But I don't spend a bunch of money on hay and vet bills. They either make it or they don't. I go by what an old successful cattleman told me. Those cows need to make me a living, they're not here for me to make them a living.

Lol, I like that.

[ClayW]

Most folks I know back home own the land and run cattle as a hobby. My FIL for example...he prolly has 60-70 mommas spread over 4 places. He doesn't have to feed a whole lot and I would think the annual checks from the auction are a nice bonus.

[Texans42]

Big tax write off. The whole ranch, land and equipment, etc. is put in a Corp., LLC or whatever.

Well I have done the same thing, my taxes went up and my personal liability down

A write off/depreciation is merely a deferral, it doesn’t exactly disappear.

[Texans42]

I loose money there but that’s what they brought

Give me $1.25 a pound and tell me where you want the trailer backed up to? If you have never worked with Holstein I’ll bet a dollar to a donut a 700 would be a 600 in a short time. They will die if left to eat grass.

I’ve had hell trying to run canners and feeding them out on the gain. They just don’t gain quick enough. How there are a few yards still feeding them out is beyond me. I guess cheap enough eventually happens

[Hart8]

All cattleman lie a bit... Or there would not be so many.

This.
My old deer lease owner raised cows,and a few sheep.Give him a few beers,and he'd tell ya how to make money on a cow/calf operation.Lots of government incentives.Good years it's great.Bad years,it's good.His words.

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[doghouse]

You can easily show a loss and still put some money in your pocket. The only problem is when you sell the property you have to recapture your depreciation. If you die and kids inherit the land they can start over with the depreciation. Somewhere down the line someone is going to pay big tax dollars. This is how I understand it.

[Texans42]

This.
My old deer lease owner raised cows,and a few sheep.Give him a few beers,and he'd tell ya how to make money on a cow/calf operation.Lots of government incentives.Good years it's great.Bad years,it's good.His words.

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Do you remember what the government incentives were?

[Burnadell]

It's not that difficult. Some people get a minimum amount of cows just to keep their land in ag exemption. Especially for small "Ranchette" type places. If running a small herd on your 20 acres costs you $2k per year, but it drops your taxes $5k per year. You saved $3k. (not accurate numbers, just an example)
Beats paying taxes on 20+ acres that is not in Ag ex.

Your mileage may vary.....

I totally understand about the ag exemption. That was not what the original post inferred.

[texan16]

It's not that difficult. Some people get a minimum amount of cows just to keep their land in ag exemption. Especially for small "Ranchette" type places. If running a small herd on your 20 acres costs you $2k per year, but it drops your taxes $5k per year. You saved $3k. (not accurate numbers, just an example)
Beats paying taxes on 20+ acres that is not in Ag ex.

Your mileage may vary.....

I live on 15 acres. My BIL cuts hay on my place to feed his cows (that he is obviously losing his ***** on). I dont lift a finger and my place stays under Ag exemption and lowers my taxes tremendously. So you dont have to have cattle to get a lower tax rate.

I'm with Burnadell on this one.......I cant ever get my BIL or any other buddies I have that run cattle to explain the "tax breaks" or "write offs" or all the other tax stuff they say saves them money.

[Texans42]

You can easily show a loss and still put some money in your pocket. The only problem is when you sell the property you have to recapture your depreciation. If you die and kids inherit the land they can start over with the depreciation. Somewhere down the line someone is going to pay big tax dollars. This is how I understand it.

Close but it’s not easy to show a loss and put money in your pocket. Think of it logically. To depreciate something you have to buy it first.

[gingib]

Close but it’s not easy to show a loss and put money in your pocket. Think of it logically. To depreciate something you have to buy it first.

Sure it is easy to do

[Jmslaughter966]

ya taxes and have to have significant volume

[Burnadell]

You can easily show a loss and still put some money in your pocket. The only problem is when you sell the property you have to recapture your depreciation. If you die and kids inherit the land they can start over with the depreciation. Somewhere down the line someone is going to pay big tax dollars. This is how I understand it.

Mark, that is correct, but you cannot depreciate land; only the improvements and equipment. The non-cash expenses reduce your taxable income but not your cash flow.