The 2025 Michigan apple outlook projects a strong, above-average crop of approximately 30 million bushels (1.26 billion pounds), marking the fourth consecutive year of higher-than-average crop yields. However, 2025 is not expected to rise to the levels seen in 2024 and 2023.
“The crop is expected to be down from the past couple of years,” says Joel Arends, GreenStone financial services officer. “However, most growers are satisfied with the fruit counts.”
USApple announced its harvest forecast in August. However, estimates vary across organizations.
- USApple projects 30 million bushels
- The Michigan Agricultural Cooperative Marketing Association forecasts a lower yield of 25.5 million bushels—15% lower than USApple’s forecast and 6% below USDA’s final 2024 production.
The USDA’s national apple production estimate for the 2025/26 crop year is 11.5 billion pounds (273 million bushels), representing a 6% increase from 2024.
Harvest estimates are developed when “growers and other industry experts report on what they are seeing in various regions of the state, then come to a consensus on the crop size estimate,” according to Diane Smith, executive director of the Michigan Apple Committee.
Unlike Michigan, Wisconsin apple production is not singled out in USDA reports.
Favorable Growing Conditions Set the Stage for a Good Crop
The higher yields in recent years are being driven by:
- Favorable spring and summer weather conditions
- Adoption of high-density orchards, allowing for additional bushels on fewer acres
The 2025 growing season has been particularly favorable with no significant frost or freeze events in the spring and a gradual warm-up, setting the stage for a good crop in Michigan. This contrasts sharply with 2012, when 90% of Michigan’s apple crop was lost due to 80-degree days in March followed by freezing temperatures in April.
“Scab, a common fungal disease of apples, has been limited despite moderate rain events in the first half of the season,” Arends said. “Major hail damage in an isolated area along ‘The Ridge’ in the Ottawa/Kent County corridor will have minor overall impact on Michigan’s fresh fruit supply. West Michigan is experiencing near-record drought conditions, which is impacting fruit size.”
Industry Innovations Enhance Fruit Quality
“Michigan Apple growers work with tree fruit researchers to implement the latest growing techniques and use new technology to monitor growing conditions,” said Smith, highlighting the industry’s commitment to innovation.
“This includes weather, soil health, and plant nutrition, among other factors. Michigan growers are committed to bringing the best quality fruit to the consumer,” she said.
Market Conditions
Marketing large crops has necessitated changes in how growers market both fresh and processing varieties.
“Growers are carrying less inventory into the summer of 2025 than they had in 2023 and 2024,” says Arends. “This is helping with the cash flow tightness growers were seeing in those years.”
Fresh and processing prices appear to be recovering going into the 2025 harvest compared to the lows seen in 2023 and 2024. With current tariffs affecting Pacific Northwest exports of processing apples, “there could be added supply pressure backing into the Michigan processor market,” Arends says. “Expect to see any price impacts in the second half of the harvest season.”
Retailers continue pushing for year-round availability, according to Arends. “Michigan marketers will continue to adapt to this need and will be storing more apples into the summer months,” he says. “Production management will continue to put more emphasis on fruit that can maintain quality longer.”
Apple Industry Outlook
The nature of apple production requires multi-year planning for production and variety selection. “Abrupt changes to industry marketing habits and excessive labor costs will be the major driving factors affecting producer profitability,” Arends notes.
Michigan harvested an estimated 30.5 million bushels of apples in 2024. The state has more than 17.6 million apple trees in commercial production, covering 38,000 acres on 850 family-run farms, making apples the largest and most valuable fruit crop in the state.
Many growers continue to expand into markets like hard cider or find themselves managing new varieties to support growth and balancing emerging varieties with consumer demand and retail space.
While Red Delicious remains the second most-produced apple, its production has declined steeply over the last five years. Conversely, Honeycrisp production has increased by 46% or almost 9 million bushels during the same period, according to USApple.
“New or replacement of older orchards continues at a cautious rate,” Arends says. “Producers are reducing heritage varieties with the majority of new plantings being Honeycrisp, Gala, Fuji, and Evercrisp varieties.”
Michigan and Wisconsin’s Market Position
Only Washington and New York produce more apples than Michigan, which exports to Central and South America, the Caribbean, and Asia. However, the majority of Michigan’s apple crop is sold domestically in 32 states.
Michigan apples are available year-round and can be found at approximately 200 farm markets and cider mills in Michigan, as well as more than 12,000 retail groceries across the U.S.
By comparison, the Wisconsin Apple Growers Association represents 170 commercial apple growers from across the state. Commercial orchards are found in 46 of Wisconsin’s 72 counties, comprising about 7,400 acres and producing approximately 56 million pounds of fruit worth over $9 million per year.
“I told him we were never going to get egg chickens. And then he talked me into some egg chickens,” Brittany laughed. This marked the start of the Frudzinski’s adventure in agriculture.
Ben and Brittany Frudzinski originally started their adventure together as automotive engineers. Within the past few years while raising their three children, the Frudzinski’ s realized they wanted to experience growing and raising their own food.
With the egg laying chickens giving them a running start, they dove into learning more about our food system. Brittany noted, “We found the importance of quality food, and what it could mean to grow it into a business.”
Eventually, the family started raising meat chickens and meat ducks. After two years of successfully raising poultry, they now have added seven pigs!
The Frudzinski’s are in the process of building their forever farm where they will continue to expand their operation. The couple found their land and are in the process of a DIY home construction through GreenStone. In the meantime, Ben and Brittany are educating themselves on homesteading and what that could look like on their new farm.
“At first, I kind of brushed it off, I didn’t think I would be eligible. So, I started poking around, and realized I did meet the criteria!” Brittany shared her experience about GreenStone’s CultivateGrowth Grant.
To qualify for the grant, you must meet one of these three options. GreenStone members can qualify for up to $1,000 and non-members can qualify for up to $500.
- Young – 35 years old and younger.
- Beginning – Have less than 10 years of farming experience.
- Small – Make less than $350,000 annually on agricultural products.
With the help of the grant, Brittany was able to register for the online suite of courses called Foundation in Farming and Homesteading. The online course offers education on laying hens, broilers, pigs, cattle, and so much more! “They break the course into small nuggets, which is nice because I can watch as many or as few as I want without feeling like I’m stopping in the middle,” Brittany noted.
The Frudzinski’s were able to jump right into learning more about their land and agriculture as they began their operation. Brittany shared how the course she took aligned with their values, “The course is very into having a solid layout and focusing on regeneration. That’s our target and our goal.”
Between working full-time, farming, and having a family, it is hard to find extra free time, but the couple has found ways to make it all work. Instead of opening and closing their chicken coop each morning and evening, Brittany used her engineering skills to program the door to do it automatically. She stated, “And that’s what engineering does to you, you’re always asking questions. How can I do it faster? How can we make it cheaper?”
GreenStone aims to empower the next generation of agriculturalists, like Ben and Brittany. To learn more about our CultivateGrowth program for young, beginning, or small farmers click here.
Expanding or improving your current farming operations can be both an exciting and daunting undertaking. With so many factors to consider, how can you be sure you are managing your farm’s growth successfully? Let’s start by defining what success looks like to you, no matter what your goals are for scaling your farm!
Find Your “Why”
Implementing an effective growth strategy looks different for every farm and business. What long term goal will your improved operations help you fulfill? Start by defining the “why” behind your expansion. Whether you are looking to enhance the operational efficiency of your current processes, diversifying your crops or livestock, or entering a new market, any goal you set for yourself should point back to your “why.”
Your “why” could be to preserve a family legacy or simply to embark on a new challenge or opportunity. Look at your “why” as your guiding compass. When making decisions surrounding the growth of your farm, every decision should point back to your “why.”
Maximize Before Expanding
An inefficient operation will not become efficient just by growing. In fact, growth often magnifies weak spots in your business. You should be maximizing the assets and resources of your operation before you consider scaling up. Study your current practices and operational metrics – your average yields or production, equipment and facility utilization, financial metrics such as cost of production and capital structure – then compare them to industry averages, and more importantly, to the top 25% of operations in your industry. This will help you assess performance and the efficiency of your day-to-day business operations and give you an idea as to where your efforts at improving should be focused.
If there are areas in your processes that can be improved upon, focus on those first. For example, improving your cost of production could include adopting new technology to reduce input costs or redesigning your facilities to be more efficient and allow you to get the same jobs done in less steps.
When implementing new processes, it is crucial to effectively communicate expectations to your entire team, especially new employees. One of the biggest challenges of change management is getting buy-in from your whole team. As critical as understanding your “why” is, it is every bit as important for your team to know and understand the “why” as well. Clear and effective communication, including the underlying rationale, as well as an environment that allows open and honest feedback, can ease the transition of implementing new processes.
Find a Network of People
Finding the right people who can provide their expertise and support is essential to any growth strategy. Working with a team of experts who understand your business and your industry will save you time and resources in the long run. If you identify a weak area in your processes, it needs to be addressed to continue to scale your business. Consider working with an outside consultant that specializes in your industry and can bring fresh eyes, ears and ideas to your situation. Such consultants bring helpful experience from working through similar challenges with others. Your CPA or attorney can also be a valuable resource.
Specialized lenders, such as GreenStone, bring familiarity to the unique circumstances that come with growing an agricultural operation and can provide tremendous value to your expansion efforts.
Engaging with a peer group is another great way to hold yourself accountable and learn from the experiences of others who have already experienced many of the challenges you are facing. These relationships can help you learn growth strategies from others in the industry, how they managed their operations through periods of growth, and what they learned from it. Never stop learning. Utilizing resources and continuing educational opportunities will help you learn from experienced peers in your industry. If you are a young, beginning, and or small farmer, GreenStone offers a CultivateGrowth mentorship to learn from experienced mentors.
Set Sustainable Goals
Once you’ve identified your growth strategy, it’s time to prepare for monitoring and measuring the results of your efforts. Establish a set of benchmarks or check-ins for yourself that will help you track your progress. This can be quarterly, semiannually, or whatever time frame will best help you stay on track with your goals. Know what metrics you are looking for and set a timeframe for when you expect to see progress.
Most importantly, check in to make sure your growth strategy is still aligned with the “why” behind what you are doing. If you don’t see the results you would like, take the time to reassess your plan and the execution of your strategies. There will always be things you will need to adjust from your original plan as you continue to grow.
Remember growth is not always linear (if only it were that simple)! You are solving an equation that is unique to your situation – that is the reason behind the emphasis on your “why”. You may have to slow down to gain momentum and see the results you are looking for in the long run. Again, no matter what your goals for your operation are, or what your growth strategy is, always go back to why you started, and your long-term vision for your farm.
GreenStone’s dedicated team of experts are here to support the growth of your agricultural operation. Contact your local branch today.
This article was originally published in Michigan Farm News.
As a testament to the association’s focus on member-focused service, GreenStone Farm Credit Services is proud to announce 95% customer satisfaction based on its annual member survey. The results mark 21 consecutive years the cooperative has exceeded a 90% satisfaction score.
“We’re committed to providing tailored financial services and solutions that support the growth of our members,” said GreenStone President and CEO Travis Jones. “Our members’ trust in our association underscores our exceptional team’s dedication to delivering effective and reliable service.”
The customer satisfaction survey uses a seven-point scale ranging from being “very dissatisfied” to “very satisfied”, as well as measuring customers’ perception of GreenStone’s performance over the past year. For the third year in a row, 98% of those surveyed responded they felt GreenStone is a financially sound lender with effective staff, and 73% of customers were “very satisfied.” Customers also reported the highest level of satisfaction in five years with the association’s crop insurance and tax and accounting services.
Two branches have received three or more years of an average customer satisfaction score of 100%, demonstrating the branches’ commitment to providing consistently excellent customer service.
Customers noted their appreciation for the cooperative’s Patronage program, where GreenStone gives back a significant portion of its profits to members as a dividend. This year the cooperative exceeded more than $1 billion in total dividends returned to member-owners over the past 20 years.
Additional points of high satisfaction were the cooperative’s clear communication, efficient processes, and overall positive experiences, underscoring the value of the relationship between GreenStone’s staff and its customers.
“These scores represent our commitment to continuously providing member-focused service,” said Jones. “We’re deeply invested in the success of the rural communities of Michigan and Wisconsin and take great pride in being a trusted partner in our member’s growth.”
Overall, this year’s survey results demonstrate the importance GreenStone places on providing its members unique financial solutions that help them build businesses, build lives, and build up the rural communities we call home.
Imagine the freedom to enjoy your land and your outdoor hobbies, however you choose. Whether you’re dreaming of building the perfect cozy cabin getaway on your own acres, or managing your own hunting land, land ownership is an exciting prospect that can leave you with many questions. Here’s where to start when looking for recreational land!
How to Know You’re Ready to Buy Recreational Land
How do you know when you’re ready to take the leap into landownership, or if it’s the right time to buy? Evaluate how you spend your time recreationally now and how it aligns with your long-term goals. Maybe you’re leasing vacant land to hunt on but would like to manage the property yourself. Perhaps you’ve always wanted to spend more time in nature and are looking for a place to one day build your forever home. Land ownership removes the limitations that come with leasing or sharing land and gives you the freedom to enjoy and improve your land however you want to.
Trends show land values are continuing to increase, meaning land can be a smart investment that will continue to go up in value over time. Deciding if you’re ready to invest in recreational land is a decision only you can make. If managing and improving your own land is something you’re ready to take on, then it might be time to consider how to make your rural dreams a reality!
Work with the Experts
Begin working with a lender who specializes in recreational vacant land financing right away. When you work with GreenStone, we will help you determine everything from your estimated monthly payments, down payment amount, and interest rate, and help you obtain a letter of preapproval. Your letter of preapproval is important because it lets you confidently search for properties within your price range and can also help ensure a smoother closing process.
Working with a realtor who specializes in recreational land can also greatly improve your buying journey. Realtors can help coordinate getting a land survey, percolation (perc) test, or other testing you would like to have done on the property prior to purchasing.
It’s All About Location
When it’s time to start searching for the perfect property, it all starts with the right location. The location of your land can determine how you are able to enjoy your land, and if there are any restrictions on what you can use it for. Here’s what to consider when it comes to the location of your property:
How far away will your property be from where you live?
Will the location of your land affect how often you are able to visit? When choosing your rural getaway, make sure it is still within a close enough distance that you can spend as much time on your property as you would like to. Or perhaps the land itself provides enough value to justify a longer drive!
Do you plan to build on the property?
Whether you’re planning on building your forever home or thinking about putting up a pole barn, consider if you will be able to build on your land. Are you able to get water, electricity, and other utilities to the property? Is the property in a flood zone? These are all important things to know ahead of time to ensure the land matches your vision for what you would like to use it for now and in the future.
Is the land easily accessible?
How will you get to your land? Will you need to obtain an easement to get to the property? If so, will you need a survey to determine the legal description of the easement? Also consider if you will need to put in a driveway or maintain roads to access the property. This is especially important if you plan to build on the land.
Does the property have any zoning restrictions?
When searching for property, check to see if it falls within any type of zoning restrictions. Agricultural, timber, or conservation restrictions can impact what you are able to use your land for. A land survey is another important step to help you identify property lines. Ensure the features, as well as the acreage of the property, align with how you would like to enjoy your land.
Preparation Makes Land Ownership Possible
When it comes to finding the perfect property for you, preparation before beginning your search is key. The more you know about what you are looking for, in addition to the information you can provide up front to your lender or realtor, will help make the buying process as smooth as possible. Land ownership is a big step, but with the right preparation and experts by your side, you can make your rural dreams a reality!
Contact your local GreenStone branch for more information on financing your dream recreational property.
Registration for fall seminars is now closed. Be on the lookout for future seminars near you in 2026!
Here at GreenStone, we realize the journey of turning your dream home into a reality can be both exhilarating and overwhelming. Whether you’re just beginning to explore the home building process, or you’ve already laid out your plans, navigating through the numerous choices can be a daunting task. We are here to help you each step of the way!
To guide you through this intricate process and empower you with the knowledge needed to make informed decisions, we extend a warm invitation to join one of GreenStone’s complimentary Home Construction seminars!
Led by seasoned construction loan experts, each seminar is meticulously designed to provide a comprehensive understanding of the flexible financing options available. Our experts will dedicate one hour to walk you through the entire home construction process, covering crucial aspects such as:
Loan Approval Timeline: Gain insights into the timeline for loan approval, ensuring you have a clear understanding of the necessary steps to secure your financing
Construction Timeline: Navigate the construction timeline with ease, from groundbreaking to completion, ensuring a smooth progression of your project.
Various Loan Options: Explore the diverse range of loan options available, tailored to suit your specific needs and financial preferences.
Understanding the Draw Process: Delve into the intricacies of the draw process, ensuring you comprehend how funds are disbursed throughout the construction phases.
Do-It-Yourself vs. Contracted Projects: Assess the pros and cons of taking on aspects of the construction yourself versus hiring professionals, empowering you to make informed choices aligned with your vision and capabilities.
Ready to get started, contact your local branch today!
Ah – fresh air, wide open spaces, and privacy! It’s an exciting milestone to purchase your own rural land. But what do you need to know before closing? Let’s look at some of the top questions from potential and current customers about loan rates and fees:
If I’m buying vacant land, what kind of interest rate will I get?
First and foremost, all loans have different interest rate options. When looking to purchase rural land, you’ll find different rates available to you than those you would get when financing a home. The reasoning is based on the market and the risk.
For example, in the event you have a home loan and a vacant land loan and are unable to make both payments, most will choose to pay the house loan before the land loan. Typically, a vacant land loan rate will be about one percent higher than a home loan. A loan for a parcel that’s over five acres will have a rate a quarter of a percent higher than properties under five acres.
In addition, GreenStone offers 30-year fixed or adjustable rate mortgages on vacant land. We are one of the only lenders that will do a 30-year fixed rate this way, and many customers find this long-term loan to be an attractive feature. GreenStone also does not require you to build on the land like some lenders stipulate.
What fees do I have to pay, including for closing?
On a vacant land purchase, typically customers will make a 20% down payment, plus closing costs. In certain instances, you may be able to put 15% down with a 30-year term or consider using other property as a form of collateral to meet some or all the down payment requirements. Among the closing costs, the origination and stock fees are the only two that go to GreenStone; the rest go to the external vendors who completed the work, such as the appraiser and title company.
Fees that may be included in the closing costs include the appraisal, title, recording, and company closing fees, as well as fees to obtain a flood certificate, credit report, survey, or home inspections. These fees are variable based on the loan. Your financial services officer will provide you with an estimate of these fees.
Are there prepayment penalties?
Good news! GreenStone does not have prepayment penalties. You have the flexibility to pay as much as you want, when you want.
What kind of perks does GreenStone offer?
Another benefit of partnering with GreenStone is the portion of our earnings we give back to our members each year in the form of Patronage. As a cooperative, GreenStone returns a portion of our annual earnings each year to our member-owners in the form of a dividend based on the value of active loans, that we call patronage. When our members are successful, we’re successful! This is a direct result of the relationships we’ve built with our members, and your trust in GreenStone.
Another benefit of working with GreenStone is the opportunity to obtain an interest rate conversion should a lower rate become available to you. An interest rate conversion provides you with the opportunity to lower your interest rate expense in a declining rate environment.
Compared to refinancing, an interest rate conversion is a streamlined and cost-effective process that allows you to pay less interest over the remaining life of your loan and potentially pay it off earlier than expected.
Contact your local branch to learn more about rates and fees when purchasing recreational land.
The scorching July temperatures have accelerated sugar development (brix) in Michigan and Wisconsin grape crops, setting the stage for quality harvests across both states. While quantity appears average, the season remains promising, according to Jeff Ginter, vice president of lending for GreenStone Farm Credit Services.
“We have grapes, and they’re about average,” says Ginter. “We could use a little more rain, but the crop is on track or slightly ahead because of the hot and humid weather.”
Regional Production Patterns
Southwest Michigan dominates juice grape production with 7,425 acres dedicated to Niagara and Concord varieties, compared to just 1,175 acres of wine grapes. This concentration makes strategic sense with Welch’s processing plant located in nearby Lawton. The region also boasts a substantial tourist-driven wine industry with popular wine trails attracting Chicago-area visitors.
Meanwhile, northern Michigan presents the opposite profile. The north and northwest regions feature 2,025 acres of wine grapes and merely 10 acres of juice grapes. The Traverse Wine Coast alone encompasses more than 2,000 acres across nearly 40 wineries, benefiting from Lake Michigan’s moderating effect on growing conditions.
Mounting Economic Pressures
Juice grape growers face tightening economic conditions this season. “Welch’s might be implementing reduced grower prices this year,” Ginter notes. “This will require a sharper pencil because growers will still have the same expenses in growing that crop. Contracts are tightening.”
To improve efficiency, the industry continues transitioning from traditional wooden 20-bushel boxes to stainless steel grape gondolas. These modern containers allow for quicker field-to-processing transfer, with various grants and programs helping offset purchasing costs.
Tourism Continues to Thrive
Michigan’s wine industry continues its upward trajectory with 196 wineries and tasting rooms operating as of 2025. Tourism remains the lifeblood of these operations, though consumer behavior is evolving.
“Tourism isn’t necessarily down, but it’s becoming a more conscious decision,” Ginter observes. “People are planning more and acting less spontaneously. They might still enjoy a weekend getaway experience but may hesitate to purchase a case of wine or other extras to take home.”
The industry thrives from Memorial Day through Labor Day, with autumn business heavily dependent on weekend weather conditions.
Diverse Varietals Support Industry Growth
Michigan vintners cultivate more than 45 grape varieties, with Riesling and Chardonnay leading production. White wine grapes remain nearly twice as prevalent as red varieties. The state’s wine production is holding strong with 1.9 million gallons bottled in 2024.
Wisconsin’s wine industry has seen steady growth, though it is smaller in scale than Michigan’s industry with approximately 100 wineries and 1,000 acres of wine grapes. Wisconsin’s industry relies on cold-hardy grape varieties like Marquette, Frontenac, and La Crescent, which contribute approximately $150-200 million annually to the state’s economy.
Both Michigan and Wisconsin have successfully adapted to cold-climate viticulture, developing specialized expertise for northern growing conditions.
“Growers remain optimistic,” Ginter concludes. “So far, we’ve avoided damaging weather events this year, and that’s always good news in this business.”
Mark Trowbridge started his cow calf operation in high school as an FFA project. Since then, he has expanded it to 80 head of registered angus cattle, started raising chickens as well, and is selling the meat from his cattle and chickens.
While new to raising chickens, he realized quickly how crucial it is to know about food safety. “You need to understand the time and temperature. For example, how long you have after you harvest an animal to get it cooled down to temperature to reduce any chances of contamination or bacteria growth,” Mark shared.
He also recognized the limited number of poultry processors who are licensed and can make custom orders. This gave Mark an “I can do that” mindset.
During a Farm Bureau dinner event, an ad played about GreenStone sponsoring the meal, and it talked about the CultivateGrowth grant. As a beginning farmer, Mark saw an opportunity and applied right then and there! He knew he wanted to use the grant to attend Hazard Analysis and Critical Control Points (HACCP) training.
HACCP training is a program that equips individuals in the food industry with the knowledge to identify and control food safety hazards throughout the production process. Mark thought it would be a good idea to take the training to get certified and become his own USDA meat processor.
He noted that the training was easy to learn from, and it was “nice to meet people from the Michigan State staff at the product center. They are very valuable people to know if you have questions about processing or anything farm value related.”
The knowledge Mark gained from the HACCP training gives him an extra leg up in the process of becoming his own USDA processing plant. He has recently added a large walk-in freezer on the farm and became licensed throughout the state to sell retail cuts directly to consumers. He is also hoping to be able to ship online orders through his website in the future.
Now that he is HACCP certified, Mark is applying for USDA grants to get certified and start processing at their farm and for other people too. With the CultivateGrowth grant, he is now able to give other people a place they can trust and have as a resource for safe meat products!
GreenStone aims to provide opportunities for all young, beginning, and small farmers and supports their educational and personal growth efforts with our CultivateGrowth grant. To learn more about GreenStone’s CultivateGrowth grant, click here.
Identifying the right time to sell assets is a question every farmer needs to consider. Some farmers may be considering selling non-productive assets, while others may be looking to sell the entire operation. It is critical to prepare and plan as far in advance as possible to develop a systematic approach to selling farm assets, so you don’t find yourself with an unexpected tax burden after the sale.
There are many criteria that affect individual situations including volume of assets, depreciation schedules, previous tax strategies, and debt structure which all need to be taken into consideration when determining the items to be sold and the timing of the sale. Given the complexity of most farm businesses, having a long-term plan in place ahead of the sale will provide the most benefit to the owner.
This list can help you begin the planning process; however, working with your tax and accounting specialist who is familiar with your farm assets and individual information is always the best place to start.
Communicate with Your Lender
If you are considering the sale of assets that are held in lien by a lender, it is important to communicate with them your plan to sell the asset and determine how the proceeds of the sale are to be applied to the debt.
Update the Balance Sheet and Appraisal
Knowing the true value of all your assets is the first step in deciding which assets to sell. Having a recent appraisal of your assets will help you when calculating current values for tax purposes and may be needed if called for an audit. Most appraisals are relevant for up to five years.
Clean up Depreciation Schedules
The first step many tax specialists take when working with a farmer looking to sell assets is making sure the depreciation schedule is current. The proceed, or gain, from any asset sold is taxed one of two ways depending on their depreciation status or how the asset was obtained:
- Long-Term Capital Gains are taxed at a rate of 0-20% percent dependent on the individual’s income level.
- Ordinary Gains (and Short-term Capital Gains) are taxed at a rate of 10, 12, 22, 24, 32, 35, and 37%, and are also dependent on the individual’s income level. You will note ordinary gains have a minimum rate of 10% and a much higher cap than capital gains.
In both cases, the gain is determined based on the asset basis and the selling price. The tax basis for land is the price paid for the land or its value when it was inherited. Any improvements added to the land, such as tiling, can be added provided they were not a deduction on previous tax returns.
Basis for facilities and machinery is their original cost minus any depreciation that was written off in prior years. Fully depreciated equipment (five or seven years) will have a zero basis.
Raised livestock two years or older generally have a tax basis of zero whereas the basis for purchased cattle is the cost minus any depreciation taken in previous years.
If you plan to pay debt with the assets from the sale, it is important to know that the proceeds from the sale may still generate a gain. Likewise, if you let a lender take receivership of a piece of property, the amount of the debt eliminated is viewed as the sales price. Therefore, even if you do not receive any payment for the sale, you may incur a tax obligation.
Design a Plan
Having a systematic approach to the order in which assets are sold can reduce tax implications. The following begins with assets subject to the lowest tax burdens to more complicated and possibly higher taxed items.
- Livestock over two years of age: Cattle over two years of age receive preferential capital gains treatment. Purchased cattle are considered ordinary gains when sold.
- Young stock: Depending on market prices, cattle over two years of age may bring a higher return than young stock, so the owner needs to determine, based on input costs and project selling price, if it is more advantageous to raise the animals and capture more value in the market than selling as young stock.
- Machinery: Gains from selling fully depreciated machinery will be taxed in the same manner regardless of whether the machinery is sold at one time or in installments. The tax burden will be the same regardless of how the payment is structured, so those selling machinery in installments do not realize any tax savings.
- Facilities: Facilities that have been fully depreciated have a basis of zero. For facilities not fully depreciated, the basis is the purchase cost or value at the time of building plus any improvements, minus any depreciation.
- Land: Land is by far the most difficult sale for a farmer and generally one of the last assets to be sold. Gains from the sale of land will be taxed as capital gains. The gain is calculated based on the selling price minus the basis. For example, if land is sold for $100,000 and the adjusted basis is $20,000, the taxable gain is $80,000.
- Crops/Feed: Standing crops sold with the land are taxed as capital gains whereas harvested crops sold as inventory are taxed as ordinary gains. Therefore, if land is to be sold in the fall, it may be advantageous from a tax perspective to sell the crop in the field versus harvesting and selling the crop. Crops sold as feed need to have a bill of sale indicating the price paid for the crop.
- Personal property: Married couples who have lived in the same residence for more than two years can realize up to a $500,000 gain in the sale of their residence without generating a taxable gain. It is important to apply as accurate a value as possible on the value of the residence when selling a home attached to land.
- Personal investments (IRA’s, etc.): When looking to tap into investment portfolios, it is important to know the structure of the investment (Roth versus IRA, etc.) and the length of time you have had the portfolio. Roth IRAs held for more than five years, or the owner is older than 59 and one-half are not taxed. When determining other investments to sell, those with a higher basis and less appreciation will incur the less tax burdens. Investments held for longer than a year are subject to capital gains while those held for less than a year are taxed as ordinary gains.
Communicate with your Financial Advisor(s)
Throughout the process of selling any number of assets, it is helpful to keep an open line of communication with your trusted financial advisors. Your accountant, lender, or other farm consultant can help you make the best business decisions. Reach out to yourtax advisor as there may be additional tax strategies available to you, including asale approach made available by the One Big Beautiful Bill Act.
This article was originally published in Michigan Farm News.