Directory
Industry Insights
Farm Depreciation Planning – Expensing of New Buildings
Author: Kyle Hesemann
Kyle Hesemann
Senior Manager
Manufacturing & Distribution
Springfield
972.702.8262
A unique income tax write-off for farmers is set to expire on December 31, 2011. Bonus depreciation of 100 percent can be used on newly constructed farm buildings placed in service by the end of this year.
Examples of eligible farm buildings include:
- Hay/pole barns
- Machinery sheds
- Shop buildings
- Livestock facilities
- Indoor riding arenas
Absent bonus depreciation, farm buildings are normally depreciated over 20 years and are not eligible for Section 179 expensing.
As a reminder, bonus depreciation has no limits for assets purchased or taxable income. It can even be used to create a tax loss. The original use requirement of bonus depreciation prevents writing off buildings that exist on a purchased farm; the building must be new construction owned by the taxpayer.
To meet the placed-in-service date of December 31, 2011, the building has to be ready and available for its specific use. For example, a farmer could have a new hay barn constructed by December 31, 2011, not actually fill it with hay until the summer of 2012 and claim 100 percent bonus depreciation on their 2011 taxes.
Orchard and vineyard farmers who have elected out of the uniform capitalization rules and are required to use the Alternative Depreciation System will not be allowed to take advantage of the bonus depreciation provisions.
Based on current tax law, bonus depreciation drops to 50 percent in 2012 and is not available for 2013 and beyond.
For more about bonus depreciation for farms, contact your BKD advisor.
Directory
Subscribe