Depreciate or Lease?
Posted: 1/10/2014 |
Congress threw U.S. agriculture a curve ball when it let accelerated depreciation virtually vanish in 2014. The popular 50% bonus depreciation sunset Dec. 31. More painful, instead of $500,000 of Sec. 179 capital improvements eligible for first-year tax writeoff, your new limit is only $25,000. (Don't have a panic attack--DTN's tax columnist Andy Biebl expects Congress to retroactively lift that ceiling to $140,000 or so, but that's not set in concrete yet. John McNutt, a consultant with Latta Harris in Tipton, Iowa, speculates the ceiling could be $200,000 or even $250,000.)
Unless Congress acts, someone in a high tax bracket who spent a total of $1.1 million on capital purchases could write off 77% of the costs in 2013, but only 14% this tax year, according to Jack Selzer, an attorney with Seigfreid, Bingham PC, legal counsel to the North American Equipment Dealers Association.
Another way to look at it is that the grower would need to come up with an extra quarter-million dollars of cash or debt to make the purchase in 2014 vs. 2013, Selzer says, so the tax change alone is likely to price some customers out of the purchase. Obviously, that could dampen demand for grain bins, tiling, irrigation or pricey farm equipment.
Source: DTN Progressive Farmer