The farming industry is one of the oldest and most essential industries in the world. As the human population continues to grow at an exponential rate, the demand for farms’ production continues to grow as well. To meet the ever-increasing demand, farmers need to increase efficacy. Using cutting-edge technology to fertilize their fields to the latest farming equipment, farmers use every available resource to increase productivity and augment their bottom lines. As per bookkeeping experts with an eye on the farming industry, most successful farmers tend to invest more in the latest farming equipment.
To facilitate and nurture the farming industry, the government creates laws that allow farmers to reduce expenses in terms of tax deductions. Section 179 covers one such expense deduction which farmers can use to purchase farming equipment cost-effectively.
What is Section 179, and what does it entail?
Primarily, section 179 is a component of the Internal Revenue Code, which pertains to expense depreciation for farming equipment and property. Under the rule mentioned above, the farmers can deduct the cost of the equipment they have purchased and utilized within a fiscal year. The equipment does not necessarily need to be new and can include a wide range of equipment and even livestock for breeding purposes. In 2018, the limit to which farmers can deduct the cost of the farming equipment they have purchased had been increased to $1 million.
As per the latest updates to the rule, farmers can benefit from this deduction until the total purchase of $2.5 million. If the entire purchase exceeds $2.5 million within a fiscal year, the purchaser can deduce $1 million and then depreciate the equipment purchased more than $2.5 million. Previously, the limit for deduction was up to $500,000 on the purchase of $2 million.
Although to ensure a competitive business environment in the farming industry, an upper threshold of $3 million has been set as well. The $3.5 million caps on total expenditure ensure that large farms do not exploit the rule and put small/medium-sized farms at a disadvantage.
How to use section 179 to buy farming equipment?
Bookkeeping experts suggest a variety of ways through which farm owners can make the most of the rule. Under the new control, a hundred% depreciation is allowed and will remain in effect until 2022. Therefore, farmers have five years to benefit from this rule before the deductions are gradually phased down to 20% over the next five years until 2027. Therefore, buying and declaring farm equipment before 2022 would be the most beneficial for farm owners.
Using section 179 to buy farming equipment is quite simple as long as you are buying equipment within $2.5 million limits. Since the farming equipment is quite expensive, the total expenditure can often exceed the prescribed limit to avail the deduction under section 179. To circumvent this, bookkeeping experts suggest that farm owners declare or purchase their farming equipment strategically. For instance, if you plan to buy farming equipment worth $5 million, you can acquire them throughout two fiscal so that you can avail of the deduction. In some instances, farm owners tend to delay the disclosure of their purchase to avail the deduction.
In short, buying farming equipment is just as simple as buying any other article, such as a car or truck. The only difference is that you can claim a tax write-off at the end of the fiscal year while purchasing your farm equipment. Getting the help of bookkeeping specialists can help farm owners make a better decision that would allow them to buy equipment for their farms in a more affordable way and benefit from section 179. By decreasing costs and increasing production, farmers would be able to earn higher profits and ensure that the market demand is met adequately.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.