Farmers-Take Advantage of Tax Savings
Farmers that are looking to purchase equipment before year-end may be able to take advantage of tax savings under Section 179 in the reformed tax code.
Increase in Deduction Limit
The Section 179 deduction limit for 2018 was increased to one million dollars. This also has a total equipment purchase cap of $2.5 million. The updated tax reform of 2018 gave farmers a significant increase from the 2017 Section 179 tax code. It was previously set at $500,000 deduction limit with a lower threshold of $2 million in total purchases.
Section 179 gives farmers the chance to deduct the full cost of equipment from their 2018 taxes up to $1 million and targets assets anywhere from $5,000 to $2.5 million. When $2.5 million is reached, the deduction decreases on a dollar for dollar basis and will expire when $3.5 million worth of equipment is attained. This makes it a true incentive for farmers across the nation.
Dollars to Your Bottom Line
Farmers that take advantage of tax savings puts more dollars to the bottom line, which always helps especially in today’s ag economy. Farmers can immediately write off capital investments like a new tractor or combine.
First-year bonus depreciation was also increased to 100% and expanded the qualified property to include both new AND used equipment purchases. It was previously set at 50% between 2015 and 2017 and included only new purchases.
The 100% bonus depreciation amount will remain in effect until the end of 2022 when the following phase-down will occur:
● 80% for property placed in service after December 31,
● 60% for property placed in service after December 31,
● 40% for property placed in service after December 31,
● 20% for property placed in service after December 31,
Along with equipment purchases, other eligible items can include breeding livestock, single-purpose structures like a milking parlor or off-the-shelf software. Before making any decisions, we recommend always consulting with an accountant or tax professional to make sure deductions are claimed to the Section 179 code accordingly.
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