Heck of a sales pitch....

[cuzncletus]

Just got back from the closest Deere/Kubota dealer 70 miles away. While I've been shopping both new and used tractors hard, the salesman said Congress this summer passed a bill that allowed 50% depreciation of equipment for tax purposes in the first year! That's a BIG write-off. The depreciation reverts to the old 7 year formula after the first year. The dealer said it was for new equipment and didn't know if it applied to used equipment. 0% financing, cheap insurance, HUGE depreciation- makes it kind of hard to by used....If the depreciation doesn't apply to used equipment. Anyone know more details on this?

Looking very hard at a 790 with 419FEL, Deere brand 5' bushhog. It's a little light, but I'm retired and not in a hurry.

 

[Bob_Skurka]

I believe the depreciation is limited to $20,000 worth of equipment for the whole year and there are limits to the size of company that can get the write off. I don't recall if it is limited to newly manufacturered equipment or if it would apply to newly purchased equipment of any age.

 

[cowboydoc]

Actually it is a $100k limit that you can take a 100% deduction the first year. This was raised from the $17,500. Or you can take up to $400k with the 50% rule. It is in effect for three years at which time it will be reviewed again.

 

[BillyP]

That's the way I understood it too, Richard. Also, it has to be business/farm equipment.

 

[cowboydoc]

Yes you're exactly right Billy. You have to have a legitimate business, be it farming or anything else.

 

[AndyMA]

Here's a link to a press release on the John Deere site where they explain the new rules. It appears there are at least 2 of them. They also provide a link to a site with an excel based calculator which you can use to calculate the benefits. The Deere site says it does not apply to used equipment.
John Deere Tax Info Link

Hope this helps.

Andy

 

[rjsmit1]

You may qualify to deduct the entire amount from your taxable income utilizing a Section 179 deduction, which allows small businesses to deduct the full cost of certain asset investments in the first year they are acquired. As indicated on the Deere website, the dollar limits on section 179 deductions have been raised. (This has been in the news this year because trucks and SUV's with GVW's exceeding 6,000 pounds qualify as trucks rather than cars and are eligible for the Section 179 deduction. Some of the newspapers and environmentalists were complaining because the government is creating a tax incentive to buy SUV's. To my knowledge, there is no problem deducting the cost of any tractor being used for business purposes).

Please note that this does not constitute legal or financial advice and that you should seek the counsel of your tax professional before making a decision. Good luck.

 

[cuzncletus]

Obviously there are some very bright people who read these posts and, believe me, all your input is greatly appreciated....if a little hard for someone new to digest. Here's my situation: By luck I've been able to include half of 25 acres I recently bought by an agreement in an upscale sub-division, raising my property values considerably. I'm going to assume development and sales responsibilities but have to "kick back" some sheckles for the use of the sub-division's name, homeowners assoc, private roads, etc. I will way exceed my intial purchase price on the 25 acres by selling six 1 acre lots, keeping what I consider the prime part of the land for future development. The time frame for sales of lots is 2-3 years. For at least the first year I will show a loss and negative tax exposure. I forecast this to go to two years, after which time I'll exceed purchase costs, loans, equipment, etc. Questions:

How much can I depreciate when I'm showing a loss instead of a profit?

Assuming a "turn around" of two to three years, what is my best tax strategy?

And just as an added brain teaser; "How much will this affect JD stock?" My Cat stock is up considerably this year and I'm just beginning to catch on to this factor. Haven't looked at JD in a while- thought it was too stagnant- but I've had my best luck buying companies I like, i.e. Harley Davidson and Krispy Kreme. (Vroom-vroom. Burp.)

Sorry if I'm getting too far off track. I really just like to read about tractors and forget the finance and politics that pop up in these discussions.

 

[kensfarm]

Cletus.. My thoughts would be.. at this stage in your "business".. you might want to consider finding/consulting w/ a CPA that also knows about the tax laws.. and will sit down w/ you to plan out the best long term financial tax strategy. Get referenes.. interview and ask questions before deciding on a CPA.. this will be a long term relationship.. and you'll want someone who you will feel comfortable w/.. and will work in your best interest.

 

[2003Pilot]

cuzncletus:

It is my understanding that you can't use a 179 deduction if you currently have no income from that business, or to put it more accurately, a 179 deduction must be LESS than the total income derived from that business in the year it is applied.

You can, however use standard depreciation on capital assets purchased, even though you currently don't realize any income from the business. Most equipment is depreciated over a 7 year period.

This is what I intend to do on my recent tractor purchase. I am starting a small Christmas Tree farming business on my property, and I will not realize any income for at least 7-8 years. (The trees need time to grow!)

Gary