Farm Progress

100 percent bonus on new assets that qualify.Section 179 tax deductions to the extent possible first on assets with the longest class life.50 percent bonus depreciation on all other new assets that qualify.Normal depreciation on the remaining value.Meet with a tax professional.

February 9, 2011

1 Min Read

Farmers can follow five general rules to make the most from new, tax-law deduction changes related to farm asset purchases, says Roger McEowen, director, Iowa State University Center for Agricultural Law and Taxation. These five rules are:

1. First, take 100 percent bonus on new assets that qualify (class life of 20 years or less, which includes most new agricultural buildings) and then Section 179 tax deductions on all used assets that qualify (special rules can apply if assets are leased), including single-purpose agricultural structures, such as a hog confinement facility, but no real estate.

2. Next, take full Section 179 tax deductions to the extent possible first on assets with the longest class life. “For example, if you have $100,000 of 10-year property and $600,000 of seven-year property, take Section 179 on $100,000 of your 10-year and $400,000 of your seven-year property,” says McEowen.

3. Next, take 50 percent bonus depreciation on all other new assets that qualify.

4. Next, take normal depreciation on the remaining value.

5. Next, consider meeting with a tax professional to evaluate tax implications for both past and future farm asset purchases.

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