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  1. #1
    Member Doug_D's Avatar
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    Kubota M7040

    Default 179 Tax Deductions - Write off tractor

    hey all,
    Still trying to push myself over the hill and pull the trigger on a new tractor. I run a few cows and sell some hay each year, but nothing too serious (70 acres). A good friend said I could expense the entire tractor using a "179 Dedcution" for the year. I guess its something tha congress set up to help the small business out. Has anyone ever done this? I do have some additional income that I need to offset and this would help. Any help?

    Thanks,
    Doug

  2. #2
    Member PlumCrazy814's Avatar
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    Nov 2008
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    Location
    North of Pittsburgh, PA
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    JD2305

    Default Re: 179 Tax Deductions - Write off tractor

    Quote Originally Posted by Doug_D View Post
    hey all,
    Still trying to push myself over the hill and pull the trigger on a new tractor. I run a few cows and sell some hay each year, but nothing too serious (70 acres). A good friend said I could expense the entire tractor using a "179 Dedcution" for the year. I guess its something tha congress set up to help the small business out. Has anyone ever done this? I do have some additional income that I need to offset and this would help. Any help?

    Thanks,
    Doug
    Try this link:
    Depreciation and Section 179 Expense

    John Deere 2305 - 54C MMM / Independent Hydo lift - 84" Drag Blade; JD 54" Quick Hitch front Plow with custom added rubber to blade edge.
    2007 Dodge Daytona Plum Crazy #814 of 1400

  3. #3
    Elite Member SnowRidge's Avatar
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    Jul 2003
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    3,091
    Location
    East Tennessee
    Tractor
    Power Trac PT-425 / Branson 3520

    Default Re: 179 Tax Deductions - Write off tractor

    If you are farming with a profit motive, you should be able to expense your tractor, along with a lot of other stuff, via a 179 deduction. It's really a no brainer. However, this is assuming you are filing as a farmer, which means Schedule F. If you haven't been doing this already, or don't know what Schedule F is, you probably should talk to a good tax person before you do anything else.

  4. #4
    Gold Member
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    Dec 2006
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    432
    Location
    Oakdale, TN
    Tractor
    Kubota M8540HD ROPS

    Default Re: 179 Tax Deductions - Write off tractor

    I am not an accountant, I suggest you check with one, however this is my understanding of how it works:

    I believe you should be a farmer and file a schedule F tax form. You buy a tractor, let's say for $10,000. So your cost basis is $10,000. When filing your taxes next year you have the option of using the section 179 one time tax deduction, or you could go with what I believe is a 7 year depreciation schedule.

    If you go with section 179, you get the full $10,000 deduction taken off of your income in the first year. If you go with the 7 year depreciation schedule there is a formula and you spread out your $10,000 deduction against your income over 7 years. When you consider inflation and the time value of money, it's much more attractive to go with section 179 and get the full deduction up front.

    Make sure that you understand that your deduction is not your tax savings! You are taxed on your income, the deduction is used to reduce your taxable income. Let's say you have income of $50,000, if you go with the one time section 179 deduction you can deduct your $10,000 cost from your income. So now instead of paying taxes on $50,000 you will pay tax on $40,000 of income. So if your tax rate is 25%, your actual tax savings would be 25% of the $10,000 which is $2,500.

    Now I'm not sure what happens if you buy the tractor, take the one time section 179 deduction, and then sell the tractor in less than 7 years. Maybe someone else knows.

    Finally, I don't know where you live, but I'm in TN and have a tax exemption card so I can buy a tractor and not pay sales tax. You might want to check out the sales tax situation where you live.

    Like I said at the beginning, I'm not an accountant, this is just my opinion. Hopefully it helps.

  5. #5
    Elite Member SnowRidge's Avatar
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    Jul 2003
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    East Tennessee
    Tractor
    Power Trac PT-425 / Branson 3520

    Default Re: 179 Tax Deductions - Write off tractor

    Quote Originally Posted by piller View Post

    Now I'm not sure what happens if you buy the tractor, take the one time section 179 deduction, and then sell the tractor in less than 7 years. Maybe someone else knows.
    The deduction must be recaptured according to the depreciation schedule that would have applied if the 179 deduction had not been taken. The income from the recapture is treated like ordinary income, and tax must be paid on it, including both halves of the social security tax, unless you have other offsetting losses.

    Again, consult a tax professional for this stuff.

  6. #6
    Veteran Member
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    Jul 2005
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    1,601
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    Southwest VA

    Default Re: 179 Tax Deductions - Write off tractor

    In order to take the 179 deduction you need farm income plus w-2 that at least equals that amount. this is your farm income plus your w-2...not yours and your wife's. There is also for the '08 filing year a 50% first year depreciation deduction that can be used to create a loss on your sched f. This doesn't require income that is at least as much as the 179 deduction. You can also use a sched c to do this....especially if you use your tractor for a non-farm business. the 179 deduction has been available for many years now and is not new for 08. Be aware that taking a 179 deduction reduces the basis of the tractor by that amount immediately and if you were to sell that tractor you would have to recapture the 179 deduction as ordinary income.
    I am a CPA and would not advise you to do anything without knowing your whole tax situation and therefore advise you to consult with a local CPA who is familiar with issues of this nature.

  7. #7
    Veteran Member EFC's Avatar
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    Richland, Washington
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    Enough

    Default Re: 179 Tax Deductions - Write off tractor

    Quote Originally Posted by Doug_D View Post
    hey all,
    Still trying to push myself over the hill and pull the trigger on a new tractor. I run a few cows and sell some hay each year, but nothing too serious (70 acres). A good friend said I could expense the entire tractor using a "179 Dedcution" for the year. I guess its something tha congress set up to help the small business out. Has anyone ever done this? I do have some additional income that I need to offset and this would help. Any help?

    Thanks,
    Doug
    The aditional Bush stimulus plan is good till the end of this year 2008 Economic Stimulus Act Provides Tax Benefits to Businesses Not sure if it works for you but it did for us.

    Buck

  8. #8
    Bronze Member
    Join Date
    Jun 2006
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    92
    Location
    ALABAMA
    Tractor
    Kubota GL3240

    Default Re: 179 Tax Deductions - Write off tractor

    As in any tax matter it is always better to talk with a tax professional, but since I am assuming that you are reporting the income from the farm, then by all means take the deduction. Bear in mind that once you take the 179 depreciation deduction, if you later sell the asset, the amount you receive will be taxed as income/gain, because you have 0 balance in your basis.

  9. #9
    Member Doug_D's Avatar
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    Kubota M7040

    Default Re: 179 Tax Deductions - Write off tractor

    WOW! What a great conversation. We should do more of these. Thanks to all that replied.

    Yes, we have been using a schedule F for a few years now. Not huge farm income, but we try. My day job along with other investments treats us really well. A 30k expense would be welcome. Based upon the responses, the only issues would be when I go to sell the tractor. Right now, I don稚 see that happening for a while (past depreciation schedule).

    I have the option of pulling more income this year from the sale of an investment, but did not want to do it unless I could find a good way to shield some of the money. This 179 sound like a good option.

    Thanks again,
    Doug

  10. #10
    Silver Member
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    Aug 2000
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    Location
    Cleveland, Georgia
    Tractor
    Kubota BX2660 Ansung B2504 FE loader and Kubota MMM

    Default Re: 179 Tax Deductions - Write off tractor

    Can anyone help an idiot (me) with a queastion. How does the 179 and Bush plan apply to me? I'm wanting to purchase a tractor for my landscape business? Would it be better to buy before the end of the year or after the first of next year?

    This year has been terrible because of the economy and drought. It is my 3rd year in business and my accountant has kept me to breaking even or a loss. I'll truly be at a loss this year.

    I'll talk to her as well, but give me y'alls opinion.

    Thanks

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