- Equipment that can handle more acres and yields is in demand.
- Equipment markets are strong, but availability is tight.
- Prices are going to be good for sellers.
There are actually better tax advantages for equipment purchases through the Internal Revenue Service Section 179, which provides a deduction on equipment purchases for business owners. Revised laws increased the deductions for equipment from $250,000 to $500,000 for 2010 and 2011, says Mikal Willimon, CPA specializing in agricultural accounting for Brown, Graham & Co. in Spearman, Texas. That’s an incentive for producers to upgrade equipment, he says.
“It’s a big benefit for those upgrading equipment,” says Flaming. “We have the best tax deduction we’ve ever had,” adds Dewitt. “Since you can take up to $500,000 in a deduction, there’s an incentive to buy. I see a lot of farmers who will update equipment in the next couple of years.”
“The increase in tax deductions will probably increase the demand for better equipment,” says Stock. “Any time a farmer can buy something that saves on taxes, he factors that in.”
New equipment may be worth the cost in the long run. In addition to the improved tax deductions available, the first-year bonus depreciation on new assets remains 50 percent of the original cost. For example, if you buy a planter for $50,000, you can take $25,000 in depreciation the first year, then depreciate the remaining $25,000 using normal Modified Accelerated Cost Recovery System (MACRS) depreciation schedules.