Expiring Tax Laws May Affect Year End Farm Purchases!

Posted on December 13, 2012. Filed under: Chuck Rabitz |

Looking to beat the tax man and make some last minute equipment purchases for your farm before the year’s end?  You may now have some more incentive to do so. 

Eligible tax payers may elect to deduct the cost of certain property placed in service in a tax year rather than depreciate those costs over time. This is called “Bonus Deprecation.”

For tax year beginning January 1, 2012 through December 31, 2012, bonus deprecation is at 50% with the remaining 50% being deprecated using normal Section 179 depreciation rules.

As we hear comments about the Fiscal Cliff and the economy, Congress ultimately makes the decisions on tax laws. Just like the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” that allowed 100% deprecation during tax year 2010. Currently, there is no provision to expand tax laws for bonus depreciation for property place in service after December 31, 2012.

The total amount of deprecation you can claim is also scheduled to drop and the Section 179 amount for calendar year 2012 is $139,000 with a $560,000 purchase limitation.  As the law is set to expire at year end, the Section 179 depreciation limit drops or reverts back to $25,000 with a $200,000 purchase limitation.

Will the expiring tax laws be enough to get farmers to buy before year end?  It may jumpstart some equipment purchases, especially if a farmer is sitting on cash and needs an incentive to spend it.

 Please consult your tax preparer before buying any equipment.

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