Wallaces Farmer

Tax incentive may fall short of pushing you to buy in 2016

Those tax extenders, including Section 179, are great, but of course it's more complicated than that.

Willie Vogt

January 13, 2016

3 Min Read

There's nothing like a downturn to clear the mind, really. We had some hot go-go years up through 2014, but when the wheels fell off the equipment buying wagon it sure got us all thinking about what we have in inventory and how much work we can get out of a machine. And for the amount of work form a machine I'm thinking you're defining that in two ways.

First, how many more acres can you cover with the machines you already have so you can earn more money per pound of owned iron.

Second, you may be thinking that trade-ins don't have to happen quite as often so you're getting more life out of a machine before your trade.


Both actions have short- and long-term impacts on the way you're buying in 2016. Yet Congress is no longer in your way.

As 2015 was winding down, they got busy on two big bills - the tax extenders measure and the Omnibus spending bill. A key part of that tax extension bill was the creation of a permanent Section 179 deduction at the $500,000 level (well above the base $25,000 that the market was living with in 2015). Of course, that didn't have you running out to your dealership for a purchase (though some may have).

One innovative manufacturer kicked out some online ads right after the extenders passed encouraging you to head to your local dealership to take advantage of the deal. Smart move.

And Section 179 was a nice benefit, as was the bonus depreciation available too. Bonus depreciation is phasing out over the next five years. Yet the benefit, while great for the long-term, is probably not getting you to head for the dealership for a trade at year-end.

Stability, at last

We can, however, thank Congress for finally bringing some apparent stability to this key tax provision. When it was a sometime thing with a sundown provision, and year-after-year restarting there's no way you could plan around it. Remember the end of 2014, the last two weeks of 2014. The Section 179 deduction was extended retroactively for the year, but with just two weeks left it gave you little room to move - you have to take possession of the machine to claim the deduction, not just place an order or pay in advance.

Yet any stability in taxes from Congress is welcome news. Now you can actually plan again and when times turn better you'll know you can shelter some of those potential taxes with this innovative deduction.

You'll note I said "apparent stability" above. For now the provision is permanent, and for now you can count on it. But lately with presidential hopefuls criss-crossing the country making promises to tear down what's there to make things better, that tends to put all good ideas on the table, and in that environment they sometimes don't survive. We'll see.

About the Author(s)

Willie Vogt

Executive Director, Content and User Engagement, Farm Progress

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