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Machinery purchase considerations for tax time

Programs ICONAccelerated depreciation is a way to reduce taxable income on crop farms but an Ag Economics professor says there is more growers can do to help their bottom line.

Mike Langemeir with Purdue University tells Brownfield machinery purchases need to be balanced with the total impact on the farm, “I’ve just been telling people that when you’re buying assets just be very, very careful that you analyze that asset purchase on liquidity.”

He says tax strategies ARE important, but, “When we look at equipment, besides look at the possible tax benefits of buying some machinery – the tax benefits are many times associated with section 179 and bonus depreciation – we always need to ask our self, ‘What are the benefits of buying this machinery?’”

Mike Langemeir says farmers need to ask if they can farm more acres, reduce repairs, get higher yields.

He says farmers need to compare the machinery’s price and benefits to the cost, “Costs are primarily related to depreciation, so wear and tear of the machine over time. But, also the interest costs associated with the machine.”

As for tax strategy, Langemeir says above trend yields and stronger than expected soybean prices increase the likelihood farmers will want to use accelerated depreciation for 2016.

 

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