figuring out farm taxes

Originally Posted by Sawmill Jim

Nope his tractor became a business tax loss Lots here went broke here odds are he was broke a long time back some just wont stop and do a honest accounting .What would you have to make or clear to owe $75 k in taxes . I smell a rat

Originally Posted by Mike in Ohio

Lot's of farmers around here owed over $75k in taxes this year because of O&G lease signing bonuses. And yes, lots of folks made capital investments for tax purposes - myself included. Now don't get me wrong, I've been needing a new tractor. I've had a 1952 8n (It's for sale by the way) but it just wasn't sufficient/efficient for our property. Now I have a 50 hp tractor and it is like a different universe. The bonus depreciation was just the icing on the cake. Is it wrong to fall in love with a frontend loader?

I expect a lot of folks will finance their purchases and potentially run into problems that way.

Anyhoo, I'm surprised that not a single person suggested that the OP look at IRS publication 225 - farmers tax guide which can be found at http://www.irs.gov/pub/irs-pdf/p225.pdf

Mike

Originally Posted by Plowpoint

One area that is hard to understand of the Schedule F form, is the Section 179 area, though it really behooves small farmers, and large farmers alike to understand it. Rapid depreciation is really a tool that can be used, and Congress likes to toy with that to accelerate or slow the economy. You can use that to your advantage. I am just a small farm, and yet I have used it almost every year...

Originally Posted by ET1 SS

Depreciation is real.

Most assets break-down over time.

If an item would naturally rust apart over 30-years then you subtract 1/30 of it's cost each year.

Each year's repair and maintenance costs to keep that equipment running is accounted as boosts to it's 'cost-basis'.

So each year, each piece of equipment depreciates and each year each piece of equipment also has a boost in cost-basis.

These are real world expenses, and they are tax write-offs.

It is not a trap.



'Spending $2 to save $1' is a strawman. [edited] There may be some who do this, but not all who use depreciation do that.

If you need a tractor, then buy a tractor. But like anything it will need repair work. You will need to spend your money on it's maintenance anyway even without the tax implications. Depreciation is a method whereby those expenses can come off your AGI.


I do not spend one penny 'extra' on anything simply to be able to depreciate on my taxes. I do use depreciation, and it does save me tax money.