← FarmCPA Home

Yes! You Can Write Off That New Machine Shop (At Least 50%)

By: | Trackback URL | 2 Comments

February 12th, 2013

We got the following question from a reader:

“I built a new farm workshop in 2012, can i take 1/2 of the cost off and depreciate the rest over time? I read something regarding bonus depreciation on workshops and was wondering if this qualifies?”

Bonus depreciation was placed into the tax laws as a result of the 9/11 attacks.  It was designed to provide stimulus to the economy and has allowed up to 100% bonus depreciation on any new assets with a tax life of 20 years or less and you are allowed to deduct that percentage immediately.  Unlike Section 179, there is no income limit, however, it must be new equipment or property.

For most real estate investors, bonus depreciation is not allowed since the tax life is either 27.5 or 39 years.  However, all farm buildings including machine sheds, barns, hay storage, etc. have a 20 year life, therefore, they qualify for bonus depreciation.  If you are building a new machine shed this year, it must be finished and in service by December 31, 2013 to qualify for the 50% bonus depreciation.  The remaining 50% is depreciated over 20 years.

As an example, assume our farmer builds a new workshop for $250,000.  He can immediately deduct 50% of this or $125,000.  The depreciation deduction on the remaining $125,000 is 3.75% or $4,688 for a total deduction of $129,688.  Without bonus depreciation, the farmer would only have a $9,375 depreciation deduction in 2013.

Paul Neiffer, CPA

 

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).

More Posts - Website

Follow Me:
Twitter

← FarmCPA Home

2 Comments

  • February 23, 2013 at 4:07 am

    Kim

    Paul, can you depreciate farm equipment above and beyond your farm income? This would be an offset to other capital gains revenue from royalty received.

  • February 24, 2013 at 10:34 am

    Paul Neiffer

    Yes, there is no limit on how big of a loss that depreciation will create that can be offset against other income. This assumes that you are a material participant in your farming operation.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe to this blog by:

Previous Posts

Events

View upcoming speaking engagements and other networking events for Paul Neiffer and CliftonLarsonAllen’s agribusiness team.

See All

  • Twitter Feed

    Nothing better (for a farm boy) pic.twitter.com/DUShoT5cpF

    6 hours ago

    If you have higher yields or go all corn for the 2014 crop year consider ARC-IC. It may more than offset base acre penalty 2 days ago

    Presenting two farm bill seminars today. Dayton and Walla Walla 4 days ago

    Netflix down $110 in after hours trading. Sign of momentum stocks going flat? 1 week ago

    Getting ready to go to LA to defend my son and I APU Alumni golf tournament victory last year. I may have to carry him again 1 week ago

    Everybody worried about bubble in land market. They should worry about stock market bubble 1 week ago

    77 degrees on October 8. Perfect. 2 weeks ago

    Somehow IRS listed several counties in Iowa as drought stricken. Hard to believe after all the rain this year 3 weeks ago

    Just saw a bighorn sheep eating grass in the bank next to the freeway. Less than 30' from my car. 1 month ago

    After 82 days in a rental car my wife has talked me into a cruise. We leave Thursday for Miami. Can't wait 1 month ago