People are nuts about Section 179. And on the surface, you can absolutely see why: It's a way of deducting the cost of certain business expenses and equipment at full value. A lot of business expenses have to be depreciated, meaning that you can knock a fraction off on your taxes every year until the expense is fully deducted. That's great if you're looking to help relieve a tax burden for several years running, but if you're looking for a way to quickly lower your tax bill this year, a full deduction is really appealing.
Obviously, there are some rules for farmers looking to take Section 179 deductions. All the property has to be tangible or real property, and -- surprise surprise -- some of those rules are too complicated to cover here. But know you can deduct any machinery and equipment, some storage tanks and even fur-bearing livestock. (Yes, it's detailed.) You can deduct up to $25,000 using Section 179, as of 2014.
So, are you ready to harvest some more money come tax time? Read on for more tax-related information.
Author's Note: 10 Tax Tips for Farmers
While the current limit for the Section 179 deduction is $25,000, it was at a whopping $500,000 in 2013. Congress let the raised cap expire, but do be diligent about checking with the IRS to make sure there haven't been changes in the law: They can certainly apply a higher limit retroactively and create a much higher deduction again for the 2014 tax year.
- Idlebrook, Craig. "Tax Tips for Farmers: Ten Ways to Make April 15th Less Stressful." Maine Organic Farmers and Gardeners Association. 2014. (Oct. 4, 2014) http://www.mofga.org/default.aspx?tabid=707
- IRS. "Crop Insurance and Crop Disaster Payments -- Agriculture Tax Tips." Sept. 4, 2014. (Oct. 4, 2014) http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Crop-Insurance-and-Crop-Disaster-Payments-Agriculture-Tax-Tips
- IRS. "Farm Business Expenses." 2013. (Nov. 2, 2014) http://www.irs.gov/publications/p225/ch04.html#en_US_2013_publink1000217880
- IRS. "Publication 225." 2013. (Oct. 4, 2014) http://www.irs.gov/publications/p225/ch07.html#en_US_2013_publink1000218173
- IRS. "Ten Things to Know About Farm Income and Deductions." March 26, 2013. (Oct. 4, 2014) http://www.irs.gov/uac/Newsroom/10-Things-to-Know-about-Farm-Income-and-Deductions
- Kauppila, Dennis et al. "Is My Farm a Hobby or a Business?" University of Vermont Extension. Nov. 2007. (Oct. 4, 2014) http://www.uvm.edu/extension/community/hobbybusinessfactsheet.pdf
- Keen, Scott. "10 Tax Tips for Farmers." AdviceIQ. June 23, 2014. (Oct. 4, 2014) http://adviceiq.com/articles/scott-keen-10-tax-tips-farmers
- Lee, Bonnie. "Tax Tips for Farmers." Fox Business. April 6, 2014. (Oct. 4, 2014) http://smallbusiness.foxbusiness.com/finance-accounting/2012/04/06/tax-tips-for-farmers/
- Schell, Rich. "It's Tax Time! How to Navigate the Tricky World of Farm Taxes." HobbyFarms. March/April 2004. (Oct. 4, 2014) http://www.hobbyfarms.com/farm-marketing-and-management/farm-income-taxes-14991.aspx
- Smith, Kunz & Associates. "Income Averaging for Farmers." 2014. (Oct. 4, 2014) http://www.smith-kunz.com/news.php?id=6
- Weissman, Jordan. "America's Dumbest Tax Loophole." The Atlantic. April 17, 2012. (Oct. 4, 2014) http://www.theatlantic.com/business/archive/2012/04/americas-dumbest-tax-loophole-the-florida-rent-a-cow-scam/255874/
Many Americans don't think about their tax bills until the new year. But there are things you need to do before Dec. 31 if you want to pay less later.