October 25, 2017
We’re going to need a bigger planter next year since we just rented another 600 acres. Is this the time of year to trade? We will consider new or used. What are the tax implications of buying now vs. later? If we buy new, must we take delivery now to get tax benefits?
The Profit Planners panel includes David Erickson, producer, Altona, Ill.; Mark Evans, Purdue University Extension educator, Greencastle, Ind.; Steve Myers, farm manager, Busey Ag Resources, Leroy, Ill.; and Chris Parker, cattle, hay and timber producer, Morgantown, Ind.
Erickson: Some equipment manufacturers have their best price and availability of new planters during the summer. Used planters become available as orders for new planters are secured. If a dealer has significant unsold inventory, winter months can also provide a good buying opportunity. I would advise you to let sales personnel know that you are considering upgrading planters as soon as possible to take advantage of a longer shopping window for your purchase. Have a good idea of what you’re looking for to help narrow options. Keep in mind that aftermarket equipment can be purchased to customize a good used planter to meet your specific needs. A capital purchase must be “put to use” in order to be depreciated.
Evans: One has to have delivery of the new planter or any other equipment item for which you want a tax deduction during the year of the tax year for tax deduction purposes. So to claim a 2017 tax deduction, you have to have the planter by Dec. 31, 2017. Consider your farming operation as a whole and decide whether you want the deduction in 2017 or 2018. At this point, a 2017 decision for a new planter may not be possible since it may not be built prior to the end of the year. It may not be delivered to you in time to claim the 2017 tax deduction for the purchase.
Myers: To get the tax benefits, the tool must have a serial number and be available for use or “placed in service.” While there is no set best time for this transaction, an off-season trade, like in the summer, may offer deals. In regards to tax implications, I suspect you still have your current planter on the books to utilize as a deduction, but I suggest you consult your tax preparer for details on tax matters.
Parker: You have to take delivery of the new planter before the end of the year for tax deduction purposes. Depending on the other aspects of your financial enterprise, you’ll have to decide whether you want that deduction in 2017 or 2018. Understand that if you buy new, the planter may not even be manufactured yet. It could be awhile for the delivery. So the best time to get started on this for a 2017 delivery is yesterday.
Summing up: You may be able to find better deals for a planter in the off-season. However, if you definitely need a bigger planter for 2018, then the panel suggests acting right away. You don’t have the luxury of waiting, especially if you were hoping to use it as a tax deduction for the 2017 tax year. Because of the way equipment companies operate today — often making a machine after it’s ordered instead of having machines set on lots — you may have missed the window. Your best bet might be finding one on a dealer’s lot that the dealer needs to move.
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