As 2011 draws to a close, so do opportunities for farmers to take advantage of certain provisions of the federal tax code, said OSU Extension-Ashtabula County educator David Marrison.
"The ability for bonus depreciation is changing, so if you're looking to make capital expenditures, this is the year to do it," Marrison said. "You can depreciate 100 percent now, it will go to 50 percent next year, and after that it could go away completely depending on what Congress does."
Marrison said during the past decade, Congress repeatedly has allowed faster depreciation of capital assets to stimulate business investment by providing a "bonus" depreciation allowance in the year the asset is bought.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the depreciation bonus for 2011 and 2012 to encourage new equipment purchasing. The additional first-year depreciation rules allow farmers to deduct on their 2011 income tax returns 100 percent of the cost of qualifying assets purchased in 2011 and 50 percent of the cost of qualifying assets in 2012.
The ability to write off capital purchases, however, isn't justification to make purchases just for the sake of limiting tax liabilities.
"Don't buy new paint or new steel without doing a comprehensive business analysis," Marrison advised. "Don't buy it just to buy it, but make sure it fits with your business plan and farm needs."
December is a key month for farmers as they finish harvest and consider last-minute strategies to manage potential tax liabilities. The Ohio Ag Manager newsletter is one resource to help understand potential opportunities, as well as impending changes to the tax code.
Farmers Tax Guides are available at Extension offices across the state. They give the latest information on what's new for 2011 and what might be new for 2012. Stop by and pick one up along with OSU Extension's 2011 Corn, Soybean and Forage Performance Trials booklet.
Mark Mechling is an extension educator, agriculture and natural resources, Muskingum County with The Ohio State University Extension Office and can be reached at (740) 454-0144 or mechling.1@osu.edu
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