Near Intersection of I-35 & I-90 Southern Mn. | You may want to run the farm at "breakeven" rather than at a loss for 2025. Either way you wouldn't pay in any Self Employment in to the Social Security pot for 2025. If you operate the farm at a loss you don't "get any of that unneeded Self Employment tax back" in the future. If you should make a farm profit in 2026, you might be subject to paying Self Employment tax in 2026. You might wish you had "taken" a bit more income in 2025 which would reduce the income and Self Employment tax for 2026..
On the other hand showing a farm loss in 2025 would be helpful in reducing your actual total income tax for 2025 which might overshadow the Self Employment options listed above. This may be one of those common situations where doing something helps you in some respects but has offsetting consequences in other respects. Looking at the overall picture from a several year standpoint may be wise but very confusing.
As far as reducing any future Social Security Benefits, I don't think that would be a concern for you. Since benefits are based on an adjusted for inflation 35 year average, having a new single year being quite high or quite low wouldn't affect your benefits much. I'm currently drawing Social Security and I've been told it would be almost impossible for me to increase my monthly benefits significantly due to a spectacular year or two where I paid in large amounts in Self Employment tax.
My tax man suggests that I try to come up with more farm income for 2025 rather than show the current loss. This would keep my income tax rate in the lowest bracket but yet possibly "save" having to pay Self Employment tax in 2026. This is under the assumption that the farm will be profitable in 2026 which seems doubtful at this point.
Consulting a knowledgeable tax person is advised since each situation is different.
Edited by tedbear 12/4/2025 09:41
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self employment tax
