Question: In 2024, Sunhi made all of her daughter Angelica’s student loan payments, including $3,500 in interest, through a check sent directly to the loan service provider. The loan is solely in Angelica’s name, and she is responsible for repaying it. Sunhi has no legal obligation to make the payments. Angelica’s modified adjusted gross income (MAGI) exceeds the threshold for claiming the student loan interest deduction. Sunhi wants to know if she could report the student loan interest deduction on her own 2024 tax return since her MAGI is below the threshold amounts.

Answer: No. Sunhi is not eligible to deduct the student loan interest on her return. Under §221, taxpayers may deduct up to $2,500 of qualified student loan interest paid during the year. However, one key requirement for taking the deduction is that the taxpayer must be legally obligated to pay the loan. In this case, the loan is in Angelica’s name, and Sunhi is not legally responsible for the debt, rendering her ineligible for the student loan interest deduction. In this scenario, Angelica is treated as receiving the payment from Sunhi and, in turn, paying the interest [Reg. §1.221-1(b)(4)].

Farmers face distinct challenges when it comes to filing taxes, largely because the agricultural industry operates under its own set of tax rules. Unlike other sectors, farming requires careful attention to a host of unique factors, ranging from how income and costs are reported to managing depreciation of equipment and property, and making the most of available credits and deductions.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Are government program payments considered taxable income for farmers?

A: Yes. Government program payments, such as those from the United States Department of Agriculture (USDA), are generally included in income and reported on Schedule F, Profit or Loss From Farming. These payments are taxable in the year they are received.

Q: What is the tax treatment for crop insurance proceeds?

A: Crop insurance proceeds are generally included in income in the year received. However, if the farmer uses the cash method of accounting and can demonstrate that more than 50% of the income would have been reported in a subsequent year, they may elect to defer the income to the following tax year.

Q: Are fuel tax credits available to farmers?

A: Yes. Farmers may be eligible for a credit or refund of federal excise taxes on fuel used for farming purposes. This is claimed on Form 4136, Credit for Federal Tax Paid on Fuels.

Q: A farmer sells milk from their dairy cows. Is it reported on Schedule F or Schedule C, Profit or Loss from Business (Sole Proprietorship)?

A: The income could be reported on either. However, in most cases, Schedule F is applicable. If the farmer begins to sell more processed products or has a storefront, it may be considered income for Schedule C.

To learn more about preparing taxes for farmers, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

While April 15 is the day most individual federal income tax returns are due each year, U.S. citizens and resident aliens living and working abroad benefit from an automatic two-month filing extension. Because June 15 falls on a Sunday this year, returns for those living and working abroad are due the following Monday, June 16. Even if a taxpayer qualifies for the automatic two-month extension, they are still required to pay any tax due by April 15, and the IRS will charge interest from that date.

The automatic two-month extension was implemented because U.S. citizens and resident aliens filing returns from outside the continental United States and Puerto Rico must often contend with the postal delays that sometimes occur when returns are mailed from overseas. U.S. taxpayers automatically qualify for an extension if they:

• Live and have their main place of business or post of duty outside the United States or Puerto Rico
• Are on military or naval duty outside the United States and Puerto Rico

To take advantage of the extension, the taxpayer must attach a statement to their return explaining which of the above-listed situations applies to them.

Which international taxpayers must file?

Even if they live abroad, U.S. citizens and resident aliens are responsible for filing federal income tax returns in the same manner as U.S. residents. Additionally, U.S. taxpayers are taxed on their worldwide income from all sources and must report all taxable income, as required by the U.S. Tax Code. That means U.S. citizens and resident aliens are still required to report income earned from foreign sources, regardless of where they reside.

Limited e-filing options

Taxpayers living in the United States have grown accustomed to avoiding the hassle of paper-filing their federal income tax returns by using a tax professional who e-files their returns or e-filing their returns themselves using online software. However, some taxpayers residing outside of the United States may not have those options. This is because the software used by tax professionals or provided online may not accept foreign mailing addresses. Taxpayers in that situation have no choice but to paper-file their returns by mail.

For the 2024 tax year, some overseas taxpayers with an adjusted gross income of $84,000 or less could take advantage of the IRS’s Free File program, but the program may not be available for some foreign addresses.

An additional extension available

Taxpayers who live abroad and can’t file by the June 16 deadline can often take advantage of an automatic six-month extension of time to file their returns. To receive the extension, the taxpayer must file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return by June 16. Several providers offer free e-filing of the form through the IRS’s Free File program but may not be able to accommodate a foreign address.

The six-month extension runs from the April 15 tax filing deadline, not the June 16 deadline for taxpayers living and working abroad. Thus, the six-month extension will only give a taxpayer until Oct. 15 to file their return. Additionally, the IRS will still charge interest on any tax not paid by the due date.

Additional reporting requirements

U.S. citizens and residents with an interest or other authority over certain financial accounts exceeding a combined total of $10,000 at any time during the previous year must also file a Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Financial Crimes Enforcement Network (FinCEN) Forms 114 are due by April 15, but account owners who miss the April deadline receive an automatic six-month extension until Oct. 15.