Now that the American Taxpayer Relief Act of 2012 was passed, many farmers are going back to their accountants to review what tax implications they can expect.
Perhaps the most significant, and most pleasantly surprising, provision for farmers is Section 179, which allows them to write off up to $500,000 in expenses like annual machinery and equipment investments through the 2013 tax year, said Tina Barrett, executive director of the Nebraska Farm Management Association, a consulting service for farmers.
The depreciation was scheduled to drop to $139,000 for 2012 and $25,000 for 2013. So farmers who were working with accountants before Jan. 1 are now forced to go back and re-evaluate financial choices they were planning to make in 2013.
Additionally, a 50 percent bonus depreciation that was in effect for 2012 was extended to 2013 with the tax deal. This depreciation allows farmers to write off 50 percent of brand new assets with no limit.
“There are of course more restrictions that apply to which assets will qualify for each type of accelerated deprecation,” Barrett said.
Parts of the farm bill have been extended, too, and that’s shaking up farmers’ decision-making.
“Producers are currently facing how to enroll this year in the same program choices they had last year, like direct payments, which everyone expected would be gone,” said Brad Lubben, an agricultural economist and public policy specialist for the University of Nebraska-Lincoln extension.
Direct payments are significant to farmers because they equal about $20 per acre for many corn and soybean farmers in the Midwest regardless of crop yields or prices. However, disaster assistance, a key provision particularly after a record-dry 2012, was not extended in the deal.
As far as going back to redo some of the choices they made in 2012, Lubben said many farmers are only beginning to sort out what to do now.
“The story is not done here by any stretch,” he said. “There’s just uncertainty.”
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