Webinars highlight risk mitigation research, solutions
Each session highlighted new and innovative solutions, research, and information on the latest technology and strategies to protect farms and rural communities.
Read MoreThe IRS tax code Section 179 deduction is a way to reduce the total cost of new equipment and machinery by enabling the buyer to claim full depreciation in year one.
The following information is provided by Nationwide, the No.1 farm and ranch insurer in the U.S.¹
The IRS tax code Section 179 deduction is a way to reduce the total cost of new equipment and machinery by enabling the buyer to claim full depreciation in year one. Normally, that depreciation (referred to as “bonus depreciation” by the IRS) would be parceled out annually over the time the purchase is financed. You should consult with your personal tax advisor for guidance on Section 179.
According to the IRS, Section 179 deduction was expanded in 2018 to cover both used and new qualifying equipment.
Under Section 179, you can choose which purchases to cover and which you would like to save as future tax breaks. Some farmers and ranchers choose to split the Section 179 deduction for individual purchases in their year-over-year tax planning. You should consult with your personal Tax Advisor for guidance on Section 179.
“In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off $10,000 a year for five years,” according to Section179.org, a hub of information on the deduction. “Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. And that’s exactly what Section 179 does — it allows your business to write off the entire purchase price of qualifying equipment for the current tax year.”
According to the IRS, anyone buying, financing or leasing new or used equipment will qualify for a Section 179 deduction, provided the total amount is less than the yearly cap. For farmers, that typically means equipment, machinery, tools and software purchased between Jan. 1 and Dec. 31.
For example, on equipment purchases of $1.15 million, the first-year write-off is typically $1.05 million, with a bonus first-year depreciation of $100,000. After Section 179 and bonus depreciation are claimed, straight-line depreciation may kick in after the effectiveness of the two prior forms of depreciation are utilized. Straight-line depreciation allows equipment purchased to be depreciated at a rate spread over the remaining years of its expected salvage value. For a piece of equipment with a useful life of five years, that means the total value declines by 20% each year. To leverage a Section 179 deduction in a case like this example, the first step is to consult with your personal tax advisor.
While the tax incentives under Section 179 are appealing to drive down income, farmers and ranchers should avoid depending only on this Code section. “Section 179 is certainly a powerful tool for farmers, but it also comes with some items to watch out for. If you sell the asset you took a 179 deduction on prior to the end of its’ useful life you will be subject to recapture rules. Additionally, if you are planning to transition your operation to the next generation you may be building up a tax wall that may hinder your ability to effectively and efficiently transition those assets how you desire,” said Steve Hamilton, JD of the Nationwide Retirement Institute.
You and your tax professional can reference Section179.org for information you need to make the most of the Section 179 deduction and bonus depreciation before the end of the year. Find additional ideas to protect and strengthen your operation at aginsightcenter.com.
Each session highlighted new and innovative solutions, research, and information on the latest technology and strategies to protect farms and rural communities.
Read MoreStaying alert is the best way to prevent accidents on the road.
Read MoreOn this Ohio Farm Bureau Podcast, learn about an accelerator program helping communities tap into state funding and tap into more reliable internet. Plus, find out what goes into a good farm estate plan.
Read MoreJoin us Oct. 22 at 6 p.m. at the Rome Fire Department for Grain Bin Rescue Training taught by the National Education Center of Agricultural Safety.
Read MoreGet some tips to keep yourself protected this harvest season from the Ohio Bureau of Workers’ Compensation and learn about the research being done at the new AgTech Innovation Hub.
Read MoreIf you’re interested in exploring manure digesters for your farm, talk to an Ohio State University Extension specialist familiar with the systems.
Read MoreOhio Farm Bureau is featuring innovative agricultural technology solutions and cutting-edge research at this year’s Farm Science Review Sept. 17-19.
Read MoreHamilton Insurance Agency was started in 1990 by Virgil Hamilton after graduating from Ohio University with a degree in finance….
Read MoreLearn more about how the Ohio Soybean Council is working with trade teams from around the world to find demand for Ohio grown soybeans and why more farmers are looking into forming LLCs.
Read MoreThe Jackson-Vinton Farm Bureau Board of Trustees set up a membership table at the Jackson County Fair. They partnered with…
Read More