It's time to think about taxes again. Actually, right now it's time to make any last-minute purchases in 2011 if that is advantageous.
I found this thread searching on 'deduction', researching another tax issue, and I see a point here that it seems everyone overlooked. Maybe this will help the next person who finds this thread.
First, a tractor isn't a 'motor vehicle'. It belongs in the category of 'specialized equipment dedicated to producing farm income', roughly similar in concept to a cattleman's fencing or a logger's chainsaw. (But you should use the depreciation schedule suitable for tractors, not fencing). If your use is partly farming-for-profit and partly tilling your family vegetable garden, you have to split the cost into business and personal categories. For the personal side, stop right there, the personal side has no tax significance unless you can do something (not likely) with that portion of the tractor's sales tax.
Second, all the discussion above seems to assume the tractor will be deducted on the owner's personal income tax. No. Tractor purchase cost should be the sum of the dealer's total invoice (price, tax, shop setup, delivery etc) plus whatever reasonable other costs you incurred that are directly applicable to buying the thing. I would include mileage (at the standard rate) for the first trip where you went to look at it, the second trip where you handed over a check, and of course your mileage if you fetched it with your own trailer. Then if you bought used, your renovation costs to prepare it for service. (or options you bought elsewhere and installed on it). What you want is the sum of 'grand total cost at the moment it is put into service'. This is the 'basis' that you depreciate as costs applied on several years income tax returns, or possibly depreciate immediately if it qualifies for Section 179.
Then - this depreciation cost doesn't go on your personal return like your new car. It goes on Schedule F - Farm Income, where it will be netted against the farm's income that you listed there. The net total at the bottom of Schedule F goes to a single line on your personal income tax return. It is possible for that to be large negative number but watch out for the '3 in 5' rule described in a post above.
I offer the above as a suggestion only. (and I rarely make my own Schedule F's negative, I don't want an audit!) I prepare my taxes this way then take them to an Enrolled Agent (tax professional) for review because I don't bother to keep up with changes in tax law every year. That's his job.
I learned an important point in 2009. Two unrelated Enrolled Agents told me the same thing: Sec 179 (immediate) deduction for purchased equipment can only be applied to the extent of earned income. My wife and I were finally retired so had zero wage income reported on a W-2. I asked if Deferred Compensation income or investment income could be counted - no. In my case I could take Sec 179 deduction only up to the point where it brought my Schedule F, farm income, down to zero. I was no longer renting out the little cabin at the ranch so I couldn't apply some tractor cost as 'landscape maintenance' against that rental income as I had in earlier years. I still haven't researched tax law to verify this 'earned income' rule but since both professionals advised getting it wrong would result in an audit, I relied on their professional opinion and did it their way.
One last comment - don't apply common logic to your circumstances and then assume tax law will match your conclusions. Think instead that the latest tax law reflects various lobbying efforts you never heard of. That's why you need review by a tax professional who keeps up with the latest publications and tax court rulings.
Added: I see a good discussion of Section 179 over in another thread.
179 Tax Deductions - Write off tractor
Many bad folks get away with crimes- BUT always get caught on cheating on their TAXES..