The Section 179 depreciation provision of the tax code, long a part of the lives of small business operators everywhere, was significantly expanded in the wake of the 2008 financial crisis. The aim was to get businesses to buy long term assets, which can give the economy a boost.
In agriculture, that provision has given farmers a nice tax break for new and use farm equipment, but that provision is about to roll back to its pre-expansive days. And given how little Congress is getting done right now, chances of Section 179 being extended in its most current form as slim, and none.
Of course, before you head off to your local farm equipment dealer to buy that tractor you've been eyeing since it showed up on the lot, check in with your tax adviser, and your banker. The rich nature of the tax provision, however, is sometimes "money left on the table" if you don't buy.
Here's a refresher on the provision as it stands today, but all of this goes away on Dec. 31:
2012 Deduction Limit = $139,000
This is good on new and used equipment, as well as off-the-shelf software.
2012 Limit on equipment purchases = $560,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced.
Bonus Depreciation = 50%
This is taken after the $560k limit in capital equipment purchases is reached. Note: Bonus Depreciation is available for new equipment only. Bonus Depreciation can also be taken by businesses that will have net operating losses in 2012.
The above is an overall, "simplified" view of the Section 179 Deduction for 2012. The information comes from the website www.section179.org which details the measure in great detail, including examples of how the program works using equipment purchases as an example. The site also has a calculator you can use to figure up your tax benefit.
The key on this bill, and it's critical to think about in the last few days of 2012, is that the farm equipment purchased to take advantage of the bill MUST be put into service before year-end. So if you buy that tractor at Noon on 12/31/12, the dealer better be able to deliver it to your farm and get it going. Just something to think about.