Crop Method
Categories: Econ, Accounting
A savvy farmer wants to deduct his or her expenses in the same tax year that revenue is coming in, to reduce the amount of taxes owed.
But what if the farmer doesn't harvest and sell his crops in the same year that he grew them? No worries, as he can use the crop method of accounting to deduct the full cost of planting and growing crops in the year that the crop is actually sold.
For example, he might plant his parsnips in the summer of 2018, but wait until the following spring 2019 to harvest them, since everyone knows that parsnips taste better after they've been through a frost. Under the crop method, he can deduct the parsnip expenses from 2018 in tax year 2019.