by Ken Root
The Trump Administration promises changes to the tax code and potentially lower taxes, but that is all future talk. The real tax world is now. Some ideas from a Farm Tax Planner in a down income year.
For 2016 taxes, remember section 179 of the tax code has become permanent law and the maximum depreciation is 500 thousand dollars.
Jan Shaffner is a Senior Tax Consultant with Badgerland Financial in Wisconsin says, “It gives us a very solid number to year by year plan now, knowing what the right off could be next year so we can plan better with current year purchases.”
Shaffner says any purchases need to be made by the end of the current year…like today or tomorrow.
“You have to make sure that the machine, equipment, or cattle that they are on the farm and in service. We cannot have a deposit made on the tractor and we are going to bring it on the farm in January because it is technically in service. We have to make sure it is ready to go before we start depreciating anything on it.”
The ability to depreciate the cost of machinery up front can be helpful for farmers, but she says it can also be a bad thing as well.
There are standard years of deduction for agriculture equipment, but the option is available to extend those years to help offset expected lower incomes.
Another thing for farmers to consider is putting money into a retirement account to help defer some taxes. She says farmers can find retirement accounts on the market that are similar to what a W-2 employee would be eligible for through an employer.