100% Bonus Depreciation – No Income Limitation!

We had a reader send in the following question:

“I read a post from you a week ago or so about 100% bonus depreciation on farm buildings. Looking at putting up a machinery shop will I be able to deduct all of the cost my 2011 taxes if I put the building up this year and have the income to cover it.”

Farmers sometimes get Section 179 and bonus depreciation rules mixed up.  Section 179 has an overall income limitation that applies to the actual deduction that might be allowed.  For example, if the farm generates $200,000 of net income before the allowable Section 179 deduction (including depreciation on all other assets), then the total amount of allowed Section 179 deduction for the year is $200,000.  This is true if the asset placed in service costs $500,000.  Remember that farm buildings are not available for the Section 179 deduction.

Now, in the case of bonus deprecation, as long as the building is a NEW building, the income limitation do not apply.  Let’s take the case of the farm building costing $500,000 with net farm income after all other costs of $200,000.   In this case, the farmer is allowed to take a full bonus depreciation deduction of $500,000 and show a $300,000 farm loss.  If the farmer has no other income, they can carry the loss back two years to offset income in 2008 and 2009 and forward to 2011 and beyond until they use it up.

Remember on all new equipment, farm structures and farm buildings placed in service in 2011, the farmer can deduct 100% of the cost without worrying about the overall income of the farm operation.  Also, make sure to review this with your tax advisor to determine if your structure is set up properly to allow the full deduction.  If you are an S corporation and this bonus depreciation creates a loss greater than your available basis, you will not be allowed to deduct the full amount of bonus depreciation this year.

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).

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153 Comments

  • February 16, 2011 at 9:28 am

    Jim Baty

    Do I understand this correctly? My farming operation is not my main source of income, but I do farm over 700 acres. If I put up a new Morton-type building in 2011, I can deduct 100% of the cost of construction on my 2011 income taxes? I knew this was true in 2010 but had not heard if it was renewed for 2011. Please advise.

  • February 18, 2011 at 6:19 am

    Paul Neiffer

    That is still true for 2011. In 2012, it would be 50%.

  • March 6, 2011 at 7:35 pm

    Ben

    What if I have an existing farm structure (not single purpose) just a barn used to hold tractors, etc. and I have to replace the roof. I understand that this is 20 year property, but am I eligible for 50% bonus depreciation on the roof replacement?

  • March 6, 2011 at 7:36 pm

    Ben

    Additional clarification…my question pertains to tax year 2010.

  • March 19, 2011 at 11:11 am

    Brad Crandell

    I am having a great deal of trouble trying to determine if a farm building roof replacement would be eligible for the 50% bonus depreciation in 2010. This is a general purpose building not single-purpose. I believe the new roof is a 20 year 150% asset. This is an existing building, just a new roof.

  • April 4, 2011 at 4:43 pm

    Chris

    Paul – thanks for the great blog! In re: to bonus depreciation on a farm structure – can we deduct the full cost of putting up a steel structure for this purpose, e.g. land grading, concrete pad, electrical, etc. or does it just apply to the actual ‘property’, i.e. the steel structure itself?

  • April 6, 2011 at 8:35 am

    Paul Neiffer

    It includes everything related to the building including the costs that you have listed.

  • April 7, 2011 at 9:29 am

    Cindy

    I have a small farm, which I get rental income for most of the land, and I farm 20 acres for hay. I use the hay for my horses, and sell what I don’t need. I file a Schedule F in my personal return. My net income per year from farming is $4,000 or so. My husband has a computer consulting business. If in 2011 we put up a $80,000 farm building to house our farm equipment, the hay, and use as an indoor arena, can I use the $76,000 loss to offset my husband’s income from his business in 2011?

  • April 8, 2011 at 6:11 am

    Paul Neiffer

    Based on the fact that you are showing net income from the farm operation and the hobby rules do not apply, you will be able to deduct the whole cost of the farm building and offset his income. However, he would still be subject to the self-employment tax on his income.

  • April 10, 2011 at 6:20 am

    Dawn

    Paul, thanks for your blog. I have a full-time professional career and a horse boarding start-up company(LLC). My prospect client base demands an indoor riding arena/barn and I will continue to have limited income on the start-up until I construct this barn with indoor arena. Would this qualify for 100% bonus depreciation in 2011? If I also have to purchase an easement and construct a new driveway to this barn, does not qualify toward construction? Thanks for your website.

  • April 11, 2011 at 4:53 am

    Paul Neiffer

    As long as you get the construction finished this year, it should qualify for the 100% deduction. The easement would normally not be deductible, however the driveway is considered a land improvement and subject to the 100% bonus.

  • May 8, 2011 at 6:35 pm

    Dan

    Paul,

    Appreciate this information. I have a follow up for you. We are going to be cost share farming with a family member. We have cash rented our land out in the past. I also have a full-time job working as a w2 employee for a company. If we show say, $30k in farm income and build a new $50K machine building for our equipment in 2011, is it possible to reduce my w2 income by the $20K difference as well?

  • June 11, 2011 at 4:19 pm

    jon

    Paul,

    I have an S corporation and am looking to build a housing structure for an employee of the corporation to live. The structure would be on the home quarter and be owned by the corporation. If it is built in 2011 could the structure qualify for the 100% depreciation?

  • June 13, 2011 at 3:20 am

    Paul Neiffer

    Yes, that is considered a farm building since it is providing housing for its employees. As long as it is completed by year-end, it would qualify.

  • June 27, 2011 at 7:06 am

    steve

    I have an 80 acre farm 60 in CRP and the rest is rented out pasture. I live on the farm and work off of the farm. Farm income is about 5000. Would I qualify for bonus depreciation for a new 13,000 dollar ma c hine shed for 2011?

  • June 28, 2011 at 1:18 pm

    Paul Neiffer

    If it used as a machine shed it meets the definition of a farm building it would qualify

  • June 29, 2011 at 6:36 am

    Rudy

    Paul is there any rules pertaining to past 263(a) elections that correlate to current bonus depreciation eligibility?

  • July 1, 2011 at 11:56 am

    Paul Neiffer

    Can you be a little more specific on this question.

  • July 7, 2011 at 11:04 am

    Sam Hunter

    Paul,
    We built a new 50 by 50 steel machine shed last year. The concrete floor was poured over an older grain bin floor that had partially collapsed. Our accountant told us it could not be totally depreciated in one year. Judging from the comments in this blog it should be eligible. Could his determination be because the shed is owned by a Trust?

  • July 7, 2011 at 11:41 am

    Paul Neiffer

    If the project was started before September 9, 2010, then it would only be eligible for 50% bonus depreciation unless you could segragate out some components that were started after that date.

  • July 23, 2011 at 11:29 am

    Shelly

    Paul, Would a new agricultural construction (metal livestock barn) in the state of Kansas be elligible for the 100% bonus depreciation writeoff if we start it in Sept. 2011 and finished before year end? Is there an IRS publication that’s used to determine elligibility? Which form is used to file for the deduction at year end?

  • July 23, 2011 at 3:14 pm

    Paul Neiffer

    Since all agricultural buildings and structures are 20 year or lower life property, they are all eligible for the 100% bonus depreciation if newly constructed during 2011. The depreciation is claimed on form 4562 just like other depreciation.

  • July 23, 2011 at 11:16 pm

    lloyd harding

    Want to build grain storage with100% depreciation what is thecode number or where is it written ?

  • July 31, 2011 at 6:15 pm

    Shelly

    Thanks Paul. Would this type of special depreciation deduction be claimed on line 14, Special depreciation allowance…? or Line 15, Property Subject to section 168(f)(1)…?

  • August 1, 2011 at 4:43 am

    Paul Neiffer

    Shelly, the 100%/50% bonus depreciation allowance is reported on line 14 of form 4562.

  • August 1, 2011 at 4:48 am

    Paul Neiffer

    Code Section 168(k) governs the application of the bonus depreciation rules.

  • August 6, 2011 at 7:00 pm

    Tim

    I run my business and file Schedule C and not F as I sell my product all year long and have other non agriculture related sales. Would I still qualify for the 100% depreciation when I build a couple metal storage buildings for my beekeeping?

    Also, If we plan on improving one of the buildings at a later date (when money allows) and add a retail store and an office (in addition to the beekeeping and honey storage) would it still qualify? The improvements would obviously not qualify, though this tax law will have expired by then anyways.

    What are the implications of converting a property intended for one purpose (for which the 100% depreciation was taken) to another. (ie. beekeeping equipment storage to storage and honey harvesting, or converting a barn from hogs to chickens for example)

  • August 9, 2011 at 6:57 am

    Rod

    Hello Paul.
    We have a 77 acre farm which the majority of tillable land is banked in a CRP program. I currently have what is probably considered a ‘Hobby Farm’ since we have never drawn income from the land other than through this program but are going to pasture out a tract to raise and market miniature donkeys. Would there be any limitations to our eligibility when we build the new structure providing we have it completed by year end?
    What if we have the building completed but fail to generate income due to timing? Would the CRP payments satisfy the ‘Farm income’ portion for qualification? To me, it looks like we may be walking a fine line with the possibility of being rejected for this benefit. It would help to have some clarification before we start building due to the fact I may want to increase the structure size if I’m rather confident I can recoup some of my out-of-pocket investment through this bonus depreciation.
    Thank you in advance for any input you may be able to offer.

  • August 12, 2011 at 6:02 am

    JEFF HARTMANN

    I HAVE A CLIENT WHO IS A CONTRACT SEED PRODUCER. IF THEY BUILD WAREHOUSES TO STORE THE SEED, WOULD YOU CONSIDER THAT A SPECIAL PURPOSE FARM BUILDING? REMEMBER THE WAREHOUSES COULD STORE ANYTHING FROM SEEDS TO AUTOS.
    SINCE THEY CAN HAVE MULTIPLE USES ARE THEY SPECIAL PURPOSE FARM BUILDINGS?

  • August 14, 2011 at 3:57 pm

    Paul Neiffer

    If your business is not a farm, then constructing a building would not qualify for 100% bonus depreciation. The building needs to be placed in service on a farm.

  • August 14, 2011 at 3:59 pm

    Paul Neiffer

    The construction of the farm building may qualify for 100% bonus depreciation, however, if this is considered either a hobby farm or simply passive income from the CRP and no other material participation, you may not be able to take any deduction on your return in the current year. All of the deduction may either be loss or carried forward. This is something you should review with your tax advisor since the facts will determine the outcome.

  • August 22, 2011 at 9:37 am

    Brian Haugen

    Paul if I buy NEW property that has an existing farm building that is 3 years old if i specify in the purchase agreement that i am purchasing the asset for lets say 100k can i claim the bonus as it is new to me and put in service by me in 2011???

  • August 23, 2011 at 2:46 am

    Paul Neiffer

    You would not be able to take the 100% bonus depreciation on the building. The first use of the building must be by you, not the bulding being new to you.

  • August 29, 2011 at 7:31 am

    Shannon Downs

    Would the 100% depreciation apply to a new roof on a barn on a farm if completed by December 31, 2011?

  • August 30, 2011 at 5:29 am

    Sara

    does the building have to be completed in 2011? or does the paper work just have to be completed and signed?

  • August 30, 2011 at 5:33 am

    Paul Neiffer

    The building must be completed and placed in service before the end of 2011, otherwise, if it is finished in 2012, then the 50% bonus depreciation rules apply.

  • September 13, 2011 at 11:53 am

    Steve

    I cash rent out 282 acres with income of $60,000 and have some waterway and crp.
    I want to build a new machine shed to house the tractors and mowers for taking care of the waterways and crp, plus cleanup on the farm. Am I eligible for the 100% deduction if the building is finished prior to end of 2011? Thanks

  • September 14, 2011 at 5:11 am

    Lori

    Hi, we have 20 acres. we rent out most of the ground to a family member who farms it. We have horses and sell some of the hay that we bale off of the rest of our property. Its not a huge amount of income though. My husband has his own construction business and we have equipment we use both for his business and some exclusively for our hay operation. If we put up a building and are using at least part of it for storage of said equipemnt would we qualify for this tax deduction also this year? Thanks!

  • September 14, 2011 at 6:26 am

    Paul Neiffer

    Based on these facts, you would be.

  • September 14, 2011 at 6:27 am

    Paul Neiffer

    You need to be careful here. The storage of the equipment for construction can taint the farm use which means it would not be eligible for the 100% bonus depreciation. If when it is built, it is primarily farm use, you would be OK, but based on your facts, I am not sure if you have enough farm use.

  • September 20, 2011 at 9:25 am

    Kale

    Hello.  I am a first time farmer and I have recently bought 60 acres of bare land.  I would like to build a storage building to house equipment, livestock feed, tack, etc. and plan on completing all construction by year end.  I will be filling out a schedule F for the first time on my 2011 tax return.  I currently do not have a farm tax exemption but am working on getting one.  Would I qualify for this bonus depreciation in my current tax status or does something designating me as a “farmer” have to be in place first?

  • September 20, 2011 at 6:21 pm

    Paul Neiffer

    As long as you are producing a crop on the 60 acres, you should be OK, however, if the land remains bare, you may have an issue.

  • September 22, 2011 at 10:39 am

    Adam

    I want to purchase a farm truck to use in maintaining 30 acres of farm land I own. I am looking at a $50,000 truck and earn about $125,000 of additional income from a job unrelated to farming. How do I go about writing off the purchase of this vehicle? Over what time period will it depreciate… 5 years or 7? Also, when will the vehicle be considered placed in service? (The day I buy it…or for the whole year in which it was purchased) I will have no farm income yet, but will be trying to work the farmground so that one day it will generate income.

  • October 2, 2011 at 9:02 am

    Jared

    We have 44 acres that we let a farmer cut the hay on we would like to raise some cows we need new fencing and a new tractor my wife works off the farm so if we buy this tractor and fencing can we take this deduction we have no farm income at this time we are just starting out we file a joint return we had to pay fed tax last year

  • October 2, 2011 at 10:28 am

    Tom

    Great site pPaul. If I start a barn in October and finish it Dec. 20 will I be able to take 100% depreciation? I also read some stuff on “Go zones” etc, does that affect me? Lastly, what if I erect a building on property I own with someone else but I pay all of the cost myself. we would have a written agreement and a buy/sell should something happen to one of us. Can I take the 100% deduction on my scedule F?

  • October 2, 2011 at 2:06 pm

    Paul Neiffer

    The key is finishing by the end of the 2011 and since you state it would be done by December 20, 2011, you should be fine. It would be great to have an occupancy permit from your local county to verify in case of an audit.

  • October 2, 2011 at 2:07 pm

    Paul Neiffer

    My preference is that you have some cows already purchased for breeding stock or steers that you are raising. You may still be OK based on your question, but if the plan is to raise cattle, you should have cattle.

  • October 2, 2011 at 2:38 pm

    Tom

    any idea if the IRS would handle it differently if I put the building up on proprty I owned with another? I would pay the entire cost and take 100% of the deduction?

  • October 2, 2011 at 2:46 pm

    Tom

    forgot one last thing – If I use the bonus depreciation on a building – say the cost is $25000, does this affect the 179 expense on machinery purchases I did this year? I would like to use both.

  • October 5, 2011 at 8:54 am

    Adam

    No takers on this question??? Please help if possible.

    46.Adam Says:

    September 22nd, 2011 at 10:39 am
    I want to purchase a farm truck to use in maintaining 30 acres of farm land I own. I am looking at a $50,000 truck and earn about $125,000 of additional income from a job unrelated to farming. How do I go about writing off the purchase of this vehicle? Over what time period will it depreciate… 5 years or 7? Also, when will the vehicle be considered placed in service? (The day I buy it…or for the whole year in which it was purchased) I will have no farm income yet, but will be trying to work the farmground so that one day it will generate income.

  • October 7, 2011 at 11:22 am

    Ron Hula

    Will a net farm loss (I am self employed for my farm business) generated by bonus depreciation taken in 2011 for new ag machinery storage buildings offset other 2011 income on schedule 1040 (W2 wages, interest income and oil & gas lease bonus money)?

  • October 10, 2011 at 4:05 am

    Paul Neiffer

    Yes, a net loss from schedule F will offset your other income for the year.

  • October 19, 2011 at 12:10 pm

    K Payne

    We are new to farming this year 2011. We have about 50 acres we rent and planted beans and 7 acres we own and planted to beans. Our income is only going to be around 10,000 this year but our expenses are about that. What is this about hobby farming or not producing a profit. We are clueless on tax liability etc. My wife works outside the farm.

  • October 21, 2011 at 2:12 am

    Paul Neiffer

    Based on your facts, that would not be considered a hobby. The hobby nature is usually more associated with the raising of horses, etc.

  • October 21, 2011 at 11:22 am

    B Brown

    My husband and I own a farm. We are looking at the 100% deducation bonus for 2011. We want to build a barn or farm office. We live in Tennessee. What I have read says that some states adhere to the deduction rules and some to not. Do you know if this deduction is applicable in Tennessee?
    Also, would a farm office be applicable to this deduction bonus?

  • October 25, 2011 at 9:43 am

    Jeff Coolely

    I am selling the farm operation to my son this year but receive income from cash renting out my other farm land. I also receive CRP income. I am renovating a farm house for a farm office and will have it finished this year. Would I be able to take the 100% bonus depreciation this year?

  • October 26, 2011 at 4:09 am

    Paul Neiffer

    The farm office should be eligible. Tennessee does not allow bonus depreciation so you will need to compute using regular depreciation.

  • November 21, 2011 at 11:29 am

    Josh Feldmann

    If I had used the bonus depreciation on my 2010 taxes, can I build another building in 2011 or 2012 and take 100% depreciation or was it a one time event?

  • November 22, 2011 at 6:29 am

    Paul Neiffer

    The bonus depreciation applies each year. So if you took bonus depreciation on a new building in 2010, you can also take it in 2011 on another new building and in 2012 on even another new building.

  • November 25, 2011 at 6:54 pm

    Mike Adams

    I noticed you mentioned a farm corporation could write off a home provided for employees using bonus depreciation. Do you have any backup for this argument that farm houses are 20 year property? I’m getting heat on this issue at my office and can’t find any court cases or regs on it.

  • November 28, 2011 at 4:02 am

    Paul Neiffer

    Mike, I tried sending an e-mail to your address to answer your question, but it got bounced as undeliverable. Can you email me at pneiffer@larsonallen.com and I can reply to that email.

  • December 1, 2011 at 10:29 am

    duane keller

    What are the rules or requrements for being finished in 2011. 100 %? OR just paid for?

    Duane

  • December 1, 2011 at 6:53 pm

    Paul Neiffer

    It needs to be finished and ready for its intended use. Usually an occupancy permit is enough.

  • December 11, 2011 at 9:15 pm

    Jack Meyer

    Obama’s proposed Jobs Act includes an extension of 100% bonus depreciation through 2012 however excludes qualified real property. Does this include farm buildings?

  • December 12, 2011 at 11:15 am

    Shannon

    We built a new horse barn for our boarding business in 2011. I assume this is eligible for the bonus depreciation. My question: the barn is valued at about $75,000, however we only spent about $25,000 building it as we did all of the work ourselves. Can I write off the value, or just the actual cost? If just the actual cost, would I be better off taking 20 year depreciation?

  • December 12, 2011 at 6:24 pm

    Ed M.

    I own and operate a part time farm and live in town 20 miles away. This year I have built a machine shed/shop on the farm that includes a office, bathroom and sleeping quarters. New septic and and water systems were required to complete the building. Will all of these expences qualify for the 100% bounus depreciation of 2011?

  • December 13, 2011 at 6:46 am

    Paul Neiffer

    As long as you have been filing a schedule F for the tax return and reporting your income and expense, you should be fine.

  • December 13, 2011 at 6:48 am

    Paul Neiffer

    You would need to check with your accountant to pin down if this is a farming business or not. If you are raising horses and also boarding them, then are most likely a farmer, however, if your only business is boarding, this may not be a farm business.

    With regards to the amount to be listed, it is based on your actual cost of $25,000, not the value. If it qualifies as a farm, you may want to consider depreciating over 20 years since that may be better for you.

  • December 13, 2011 at 1:24 pm

    Elizabeth

    We are working like crazy to get the pole barn construction of a machine shop finished. We should have that accomplished and a final inspection done by next week. So technically the building will be finished in 2011. We were hoping to put in electrical and insulation, but time is growing short. How will those amenities be treated if they aren’t finished in 2011?

  • December 13, 2011 at 8:49 pm

    Paul Neiffer

    If the building is ready in 2011, then deducted in 2011. If there is still some minor work to be done, that is capitalized and depreciate in 2012 using the rules in effect then.

  • December 14, 2011 at 10:01 am

    Eric

    Mr. Neiffer – Would you please address question #46/#53 above. I think many people try to go down this slippery slope and would like your input. Thank you.

  • December 14, 2011 at 6:52 pm

    Paul Neiffer

    Can you clarify what question #46 and #53 are. My system does not show that.

  • December 15, 2011 at 1:36 pm

    Joel

    Hi Paul,
    I have a 90 acre ranch that we cut hay on and I sell a couple of hunting packages. It generates <$3000 anually. I am closing on a contiguous piece of property next week and I am told by my CPA that the current improvements on the new piece is 100% depreciable per the Bonus Depreciation program. The new property has a Barn-dominium used historically as a residential weekend place. I plan to used it as an income producing hunting camp / equipment storage facility. In your opinion does this property qualifiy for the 100% BD?

  • December 16, 2011 at 8:11 am

    Paul Neiffer

    A purchase of farm land with a building already in use on the property would not qualify for the 100% bonus since it is not a new building, i.e., the first use of service was with you, not the person selling it to you.

    If the building was in the process of being built, you may qualify, but I doubt if this is the fact.

  • December 16, 2011 at 9:58 am

    Joel

    Thanks for the response. And you are correct the building is exisiting (4yrs old). Base on the criteria cited above, does it qualify for 50% depreciation the first year?

  • December 16, 2011 at 1:12 pm

    Eric

    46.(53. Is the same question) Adam Says:

    September 22nd, 2011 at 10:39 am
    I want to purchase a farm truck to use in maintaining 30 acres of farm land I own. I am looking at a $50,000 truck and earn about $125,000 of additional income from a job unrelated to farming. How do I go about writing off the purchase of this vehicle? Over what time period will it depreciate… 5 years or 7? Also, when will the vehicle be considered placed in service? (The day I buy it…or for the whole year in which it was purchased) I will have no farm income yet, but will be trying to work the farmground so that one day it will generate income.

  • December 20, 2011 at 2:16 pm

    Shannon

    Paul, I asked about taking the bonus depreciation for a horse board for a boarding facility (entry 68 above). You responded that if I am only boarding horses this may not be a farm business and not eligible (entry 71). However another reader asked about taking the bonus depreciation for a covered arena/barn for a boarding facility (entry 11) and you said that it would be eligible (entry 12).

    I have been over p225 and can’t find anything outlining whether horse boarding is a schedule f activity or not, could you please clarify?

  • December 21, 2011 at 8:58 am

    Mike Lewis

    I put a deposit on a building in Nov 2011 thinking that it would completed and paid for by 12/31/11. The builder has not started the building yet and says it will most likely be completed mid January. What can i do to get the 100% cost dedusction for 2012? Could I just pay for it now, or does it have to be 100% complete by 12/31/11

  • December 27, 2011 at 8:01 am

    Margie

    Does this 100% Bonus Depreciation also apply to Horse Farm Boarding Facilities? We built a new Hay / Farm Equipment Barn this year and would like to use the Bonus Depreciation.

  • December 27, 2011 at 4:59 pm

    Paul Neiffer

    This is where is can get a little bit tricky. Do you board horses that you raise yourself or is this primarily boarding horses for others. If primarily for others, then you may not meet the definition of a farmer and you would not be able to take 100% bonus depreciation.

  • December 28, 2011 at 3:38 pm

    William Pine

    Hi Paul
    I have a farmer client who built a cold storage facility this year. Would in qualify for the 100 % bonus depreciation ??

  • December 28, 2011 at 11:06 pm

    Margie

    Paul, We own some of the horses and we currently have 5 horses that board at our farm. We also have a lease program to lease our horses. We have day camps, riding instruction and training for young horses that will eventually be sold. We drag the pastures, and fertilize to keep them looking long and green. We then will rotate the pastures so, they don’t get eaten too far down. It’s a lot of work to care for horses.

  • December 29, 2011 at 7:40 am

    Dustin

    Hi Paul, We started a livestock operation in 2011 and built new facilities (IE: Barns) in 2011, but don’t show any income in 2011. Since the barns are new to us in 2011 and this is our first year in this business, can we still use the 100% bonus depreciation?

  • December 29, 2011 at 6:07 pm

    Paul Neiffer

    Since you are in the business of farming, you will qualify for bonus depreciation on your new farm buildings. I must caution that the IRS may review your return more closely, but you are entitled to the deduction.

    Good luck with your ranch.

  • January 1, 2012 at 10:14 pm

    Sue McCoy

    I am starting up a miniature horse breeding farm. We built the small barn to start and have purchased two mares ( age 8 and 15) and three wean-ling colts. It is my understanding that the mares qualify as they are of breeding age. How do we figure the colts as breeding age is 3 per American Miniature Horse Assoc.
    Also the barn was built and finished in 2011 and is a single use ag. building as it will only work for mini horses, feeding, foaling and stalling. How does the barn apply?
    Should we wait till 2012 as both mares are open and won’t be bred till spring 2012?

  • January 2, 2012 at 8:50 am

    Sue McCoy

    We are in Oregon.
    Thank you for your assistance and advise.

  • January 5, 2012 at 7:35 am

    Dean

    How do I properly take the bonus depreciation on my machine storage shed built in 2011? Do I just enter the amount on Line 14 of the 4562? Do I need to show anything in Part 3 Sec B Line F?

  • January 9, 2012 at 4:26 am

    Paul Neiffer

    All of your new farm buildings would go in line 14. If there is a used farm building that would go in Part 3, Sec B, Line F, but only used assuming you are taking the 100% bonus on the new farm building.

  • January 15, 2012 at 6:08 am

    Rich R

    I own 160 and in the past I rented the tillable acreage. This year I placed most of the acres in CCRP for 15yrs. My contract requires that I manage weeds, gophers, and care for trees planted in contract. I built a pole barn in 2011 to house the equipment (tractor, brush hog, etc) necessary to house the new equipment that I needed to buy to maintain the property. Does the pole barn qualify for the special bonus depreciation? Thanks in advance for your help.

  • January 27, 2012 at 7:34 am

    lynn

    I am having trouble figuring arkansas depreciation when I use either 179 or special depr. Does the state have different guidelines and if so, how do I find them? Schedule f – beef farm – depreciating cows bought for breeding.

  • January 27, 2012 at 10:52 am

    deon

    hi, we live in tennessee moved here 1 and 1/2 years ago. on 4 acres, in 2011 we had a metal building put up mutipurpose for tractor, tools, feed storage etc.. we have begun to raise chickens not for money but as a hobby can we deduct the cost of the metal barn. thanks

  • January 28, 2012 at 2:46 pm

    Paul Neiffer

    Each state usually has instructions on how to deal with the differences in depreciation for bonus and Section 179. You can get these off of there website.

  • February 4, 2012 at 9:02 pm

    Mike Z

    I built a farm building that qualifies for 100% bonus depreciation but it will give me a much larger Sch F loss in 2011 than I would like. Can I choose to not use the full 100% depreciation and instead use about 60 or 70% and depreciate the remainder in future years? How would I do this?

  • February 5, 2012 at 7:57 am

    Paul Neiffer

    The election out of bonus depreciation is an all or none option. You can elect to depreciate it over 20 years instead of taking full bonus depreciation. One way you may be able to get what you want is to review the barn improvements and see if any of those qualify as either 7 year or 15 property and you could elect to depreciate those over that time period.

  • February 6, 2012 at 5:48 am

    Johnny B

    Mr. Neiffer,
    I was reading your thread about 100% bonus depreciation and hoped you might answer
    a question I did not see asked.

    My brother and I put in a new irrigation motor and built a building to house it in 2011.
    Everything was brand new. My income for that land is CRP alone.

    I would like to take my expenses or depreciation or both to offset the crp income.
    Would I use straight line,(how many years) for the motor and shed, or 100% depreciation,
    and expenses for either?

    Thanks for the help.

  • February 6, 2012 at 6:30 am

    Paul Neiffer

    Since it was all new, you should be able to take full 100% bonus depreciation on the improvements, however, if your farm income is treated as a rental on your tax return, you may have some passive income limitations on how much you can deduct.

  • February 9, 2012 at 9:01 pm

    Blane M

    Hello,

    I put a building up late 2011. The last invoice for materials I used wasnt paid until January 2012. I that a problem if I want to take advantage of the 100% depreciation?
    Thanks

  • February 12, 2012 at 4:16 am

    Johnny B.

    Mr. Neiffer,
    Thank you for the previous answer.
    My income is for CRP1 payments and I file a Sch. F for this income. Would this be considered rental income? Would the irrigation motor also be eligible for the 100% bonus depreciation as well as the building to house it?
    Thanks again for your answer.
    Johnny B

  • February 12, 2012 at 12:16 pm

    Paul Neiffer

    As long all of the assets are new, they will qualify.

  • February 13, 2012 at 7:13 pm

    E. Sand

    Hello,
    I purchased a 10 acre tract of land (in 2011) that I farm with hay for my horses. This tract of land is the only land that I own; I rent the home that I live in along with stables for my horses. I normally file a very simple 1040. Other than the mortgage interest & property taxes associated with the land, do I need to file any type of ag tax forms? Should I file any additional forms? Thanks in advance for your help.

  • February 15, 2012 at 8:14 am

    Jamie

    I live in MI and I have a livestock farm, run a crop insurance business, and also work for a seed company. The livestock business generally doesn’t show a big income, but I do have a farm in Il that show a big income. My question is can I build a building to house livestock in MI, and still get the 50%? I file a schedule F in IL & MI.

  • February 16, 2012 at 2:40 pm

    Paul Neiffer

    Yes, there is no federal income limitation. I am not sure about the 50% Michigan deduction. Most states follow the federal rules, but you would need to check to make sure MI does.

  • February 16, 2012 at 2:41 pm

    Paul Neiffer

    Based on the size and the facts, you should be good without having to file anything more.

  • February 18, 2012 at 5:11 am

    Fred Koster

    1. If a new roof was put on an existing older farm building in 2011, does it qualify for the bonus depreciation?

    2. Also, if a new farm building was constructed by a construction company on our farm, can we just use bonus depreciation on some of the components as we don’t need the entire cost write-off?

    Thanks alot.

  • February 21, 2012 at 7:53 pm

    Leanna

    Do animals bought and placed in service for the 1st time in 2011 also count as a special depreciation deduction.

  • February 21, 2012 at 7:55 pm

    Leanna

    I bought a herd of sheep including 40 ewes ready for breeding 10/2011. Can I take the special depreciation on them?

  • February 22, 2012 at 2:22 pm

    Paul Neiffer

    For the breeding stock, you can if they were never bred before.

  • February 23, 2012 at 10:20 am

    Sheryl

    My husband has actively farmed for over 30 years and files a Schedule F each year. He would like to construct a new machine shed on our property with used material that he acquired when a building in another county was torn down. Would this qualify as a new bulding and available for the 50 percent bonus depreciation in 2012, even if it is constructed using used material?

  • February 25, 2012 at 12:04 pm

    Brian Sisson

    I am a new farmer that is Filing my first Schedule F this year. I put up a new machine shed that is being used to store Seed from my seed business and cold storage for Machinery. I know I can write off the building because It was build and complete in 2011. Can I put my seed business on a schedule F or do I have to file a Schedule C?

  • February 28, 2012 at 3:28 am

    Paul Neiffer

    Normally, you would report your seed business on a schedule C since that business in not in the business of farming, but rather selling seed.

  • March 5, 2012 at 10:37 am

    Tiffany

    My husband is in a Poultry Farm partnership with his father & brother. We have a mobile home on the farm property that is in my husband’s name. Can the farm legally rent/lease home from him for an employee?? If so, do they claim mortgage interest & depreciation or does he??

  • March 6, 2012 at 4:42 am

    Paul Neiffer

    He can rent the home to the partnership. He would report the income and then deduct the interest, depreciation, taxes, etc. against that income. Make sure that the rent charged is appropriate.

  • March 10, 2012 at 3:21 pm

    Debbie BAck

    Paul, we have been running a ranch in Texas for about 16 years. We recently purchased 26 acres adjacent to our 380 acre ranch. We paid $13,000 down and financed the rest with equity on our current ranch through our same lender. This is ag exempt and being used as pasture and for hay production. Can we deduct the down payment? I believe we can deduct the closing costs and points, but I am wondering how to deduct the down payment. The land is totally for ranch livestock and not for personal use.

  • March 12, 2012 at 4:39 am

    Paul Neiffer

    Land is not a deductible expense, however, if the purchase included fencing, roads and wells, you can set these up on your depreciation schedule and depreciate them over their useful life or take Section 179 on the value of these assets. The closing costs are added into the total cost of the property and are not separately deductible (other than pro-rata real estate taxes, etc.).

  • March 18, 2012 at 8:24 am

    Tammy

    This year I bought a bucket calf and cow to add to my breeding stock. Unsure if both can take the special depreciation. Saw you said they qualify as long as they have not been bred before. Do you mean ever or since I have purchased? Thanks for the clarification!

  • March 25, 2012 at 10:08 am

    Mark

    Paul,
    Just stumbled upon this great blog.

    We purchased a property last year which includes 450 avocado trees. We have leased it out to the same ag company as previous owners. Lease basis is 50% split of net profit, ag company carries all ongoing expenses.

    My question pertains to depreciation. Part of our purchase price was used to settle $18K outstanding debt of $30K capital improvement for new trees, irrigation and fencing. Is there anything we can depreciate?

    My CPA asked for value of farm part of property. I didn’t see his point as land can’t be depreciated. Is it possible to depreciate value of all improvements i.e. trees, fencing and irrigation?

    Many thanks,
    Mark

  • March 26, 2012 at 10:34 am

    Read

    Where do I list the cost of buying a tractor on my Schedule F?

  • March 29, 2012 at 6:05 pm

    Shane

    If I constructed a shed on my property that I leased to my farm corporation would it qualify for the 100% bonus depreciation provision in 2011? Would this be 20 year property or would it be 39 year property (nonresidential real estate)ineligible for bonus depreciation?

  • April 4, 2012 at 8:27 am

    DBoone

    I have a 40 acre farm. All but 15 acres are in the forest reserve program. Until 2011, the 15 acres were farmed. In 2011 I put the 15 acres in CRP. May I still deduct depreciation on the buildings and equipment?

  • April 5, 2012 at 5:57 am

    Ray D

    Please explain barn buildings not eligible for 179 but are for bonus depreciation in 2011? Where does the bonus depreciation show up on the form? Do you just skip the 179 depreciation questions (software) and go to bonus? Thanks.

  • April 7, 2012 at 5:34 am

    Paul Neiffer

    Section 179 applies to assets with a IRS life of 15 years or less. Farm buildings have a IRS life of 20 years which is allowed for bonus depreciation, but not Section 179.

  • April 9, 2012 at 10:20 am

    boone

    I have a 40 acre farm. 15 acres were sharecropped farm with me until last year. I put the cropland into CRP. Will I be eligible to deduct depreciation in 2011? What other costs are deductible? CRP seeds, mowing (we hired that done)? Thanks for your help.

  • April 12, 2012 at 2:58 am

    Kia

    I am glad I came a cross this article. I am doing my father’s taxes and he started a beef cattle business this year and built a barn for that purpose. He did not make any income in 2011, but obviously hopes to in the next year. Does this mean he can deduct 100% of the cost of the barn this year? Even if he did not have ANY income at all??

  • April 12, 2012 at 1:59 pm

    Linda Decker

    I have a small farm where we raise beef cattle, very small, around 35 cows and calves. In 2011 I bought a small storage building to keep feed, farm implements, etc., and it cost around $6500.oo. I have a job also and this is just another form of income. I file Schedule F on my tax return every year. My question is, can I take Section 179 this year on the building or what do I do?/

  • April 13, 2012 at 5:44 am

    Linda Decker

    I believe after reading that I can take the 100% Bonus depreciation on the building. However, I constructed new sections of fencing for the pasture in 2011 and now I am wondering if I can also take this 100% Bonus depreciation on the fencing as well.

  • April 17, 2012 at 6:55 am

    Rebecca

    On our 37+ acres, we raise goats (my husband works fulltime for another company). In October 2011 we built a barn for those goats and their hay. Can we deduct the 100% cost of building the barn using the bonus depreciation for out 2011 taxes? If so, where can I locate that info on the IRS site? Thank you.

  • April 17, 2012 at 10:10 am

    stuart leiter

    Paul,

    can you take bounus depreciation on cattle?

  • April 17, 2012 at 3:22 pm

    Paul Neiffer

    If they are “new” to breeding. Any cow that has been bred before will not qualify for bonus depreciation. Esstentially need to buy a heifer, etc.

  • April 17, 2012 at 3:23 pm

    Paul Neiffer

    It is all farm equipment and buildings that are new qualify.

  • April 17, 2012 at 3:24 pm

    Paul Neiffer

    As long as he was in the farming business, it would qualify.

  • May 9, 2012 at 9:48 am

    Karen

    We have just purchased and are setting up a farm. We plan to build a new building to house farming items and supplies. For the future we aren’t so sure the building will always be a ‘farm’ building. How long does a building depreciated with 100% bonus depreciation have to stay as farm use?

  • May 10, 2012 at 12:53 pm

    Paul Neiffer

    There is no bright-line date on this. Normally, as long as the original intent and purpose is for farming and you continue it for at least one full year after construction, you should be fine. Preference it longer.

  • June 21, 2012 at 12:32 pm

    Candace

    Hi Paul,

    I built a watermelon shed (single purpose) for my farm during 2012. Will it be eligible for bonus depreciation for 2012 and if so what amount? I’ve seen conflicting amounts through my online research but think it’s only 50% for 2012. Thanks for your help in advance!

  • June 25, 2012 at 3:49 am

    Paul Neiffer

    You are correct. It is eligble for 50% bonus depreciation in 2012, but not Section 179.

  • July 5, 2012 at 6:57 am

    Darla

    Paul,
    We have $1000 net income from the farm and $40,000 net from off- farm income. In 2011 we built a $10,000 barn and bought $25,000 worth of used farm equipment because we are going to expand farm operations. Am I permitted to depreciate $10,000 for the barn because of bonus depreciation but only $1000 because of the income limitation of section 179? So I would reduce our total taxable income by $11,000 for 2011? Great information, Thank you!

  • July 8, 2012 at 7:59 am

    Paul Neiffer

    Actually, you may be able to take Section 179 on the full used equipment value if your offfarm income is from wages. You most likely would not want to, but you may be able to.

  • July 11, 2012 at 5:50 am

    Darla

    Thank you very much for your reply Paul. Our off-farm income is from self-employment. Because of this, are we still able to use our farm-income loss to reduce our taxable self-employment income? Thanks again!

  • July 23, 2012 at 4:48 pm

    Jeff Williams

    Paul,
    I have my property in Ohio set up as an s corp. I received $55,000 in bonus signing money for our gas lease on the property. My question is can I use bonus depreciation for 2012 on a building(Poultry/Horses)if its paid for by the s corp to offset this rental income on my 1040.
    Thank you,
    Jeff Williams

  • July 25, 2012 at 10:15 am

    Anne M Heminger

    Paul,
    Thank you for your informative website and blog. I am merely a tax preparer and I benefit a great deal from this information — the Q & A is especially enlightening. You have really provided a valuable public service for farmers and their preparers. Thanks again!

  • July 26, 2012 at 1:14 pm

    Joe

    Paul,
    I am working with a client who built a new cold storage facility in 2011. Am I understanding correctly (according to the info you provide above) that all building costs associated with this new facility should be eligible for 100% bonus depreciation? It has a fire pump room that does not contribute to daily operations–how would I account for this?

  • August 3, 2012 at 7:33 pm

    Peggy

    Paul
    We recently sold 4.4 million of ranch land that we paid approximately 2 million for 8 years ago. We are planning to use the bonus depreciation as well as the 179 depreciation to our best advantage. At present, considering depreciation and other ranch expenses, we are looking at approximately a 500,000 tax liability IF we do not sell any livestock this year. Does an indoor riding arena qualify for one or both of these depreciation options? We are planning to buy quite a lot of new equipment, also. Thanks.

  • August 17, 2012 at 1:49 pm

    Kelly

    Paul,
    I have been farming 635 acres for 4 years now on my own and also work for my family and get a wage. I want to put up a pole structure for housing equipment along with living quarters. Will this entire project be 100% deductible in 2012 if i get it done by the end of the year or will i only be able to deduct the storage portion? Thanks

  • August 21, 2012 at 9:50 am

    Kyle Voydatch

    Thanks for putting in the time to write a great article!

  • October 15, 2012 at 5:45 am

    Jennifer

    Paul, My husband has a farm where he breeds cattle and sheep. He painted his barn and fences during 2011. Am I correct that this painting must be depreciated rather than deducted as a farm expense, and, if so, does this painting qualify for the bonus depreciation under section 179?

  • February 3, 2013 at 2:13 pm

    dean

    Paul,
    Can you tell me the positives and negatives of a disclaimer trust on farmland in MN?? Can a person still get homestead credit for the acres in the trust? I believe the limit is $1 million in the trust.

    Thanks

  • April 9, 2013 at 5:36 am

    Wes

    Paul, I have purchased 15 cow calf pairs. Do I depreciate them as a group, or do I depreciate them as individual animals? I am only talking about the cows, not the calves. I plan to keep most of them, but may sell some if they are not meeting my breeding needs. It sounds like it would be best if they were depriciated individualy, but it also seems like a lot of paperwork that may not be needed.

  • April 9, 2013 at 6:31 am

    Lonnie

    My dad bought a property listed as residential in 2011.It included a house a barn and some other small buildings. In 2012 he began farming his property with crops and animals. I read that the 50% bonus depreciation may be eligible for property converted from personal to farm use. Under what conditions can the deduction be legal.

  • April 17, 2013 at 7:56 am

    Paul Neiffer

    You can go either way. usually, we set them up as a unit and if you sell some, you back out the amount sold. You can also make an election to just depreciate them as a unit and ignore the sales.

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