Are tractors and equipment a good investment right now?

[5030]

Typically, you depreciate a piece of farm equipment over a designated period of time so that once it is completely depreciated you can replace it with new. I depreciate everything over 5 years, buildings, tractors, trucks and equipment. Once it is depreciated, it is a dead expense.

Not exactly. Fuel, replacement parts and consumables like filters, tires and lubricants are all tax deductible when you are in business. Same applies to any shop related expense.

 

[5030]

Hmmm - I've never considered a tractor or implements as an investment. I buy what I need and use it.

Then you aren't in business like I am. we are a registered company here and doing business in the Ag market. Tractors and implements are all business related expenses even if I use them for personal use.

 

[aircommuter]

Typically, you depreciate a piece of farm equipment over a designated period of time so that once it is completely depreciated you can replace it with new. I depreciate everything over 5 years, buildings, tractors, trucks and equipment. Once it is depreciated, it is a dead expense.

I thought buildings were 33 years with the IRS?

 

[aircommuter]

Yeah, 3% inflation in the joke of the day. Or rather the joke's on us.

It seems the people adding up the inflation stats are the same ones doing the math on COLA increases for non-discretionary federal spending. The lower the inflation rate the less money you have to pay to retirees and medical plans and on and on and on. Follow the money.

You mean tractor parts are up 25% but it doesn’t count!!

 

[aircommuter]

Our criteria for acquiring any investment asset is a minimum 20% ROI on a 3 year hold after capital gain taxes (estimated at 34%) and carry costs. No piece of depreciating equipment or tractor will ever meet that. For example, The BRKA we bought starting in 1974 and dollar cost averaged each year since then does. That’s been our best investment ever.

There are lots if good investments. In 2004 I built a storage facility that has been my retirement income since that time. Today I get offers of $2m on it but it cost $.5m to build. Not for sale.

 

[workinonit]

Not exactly. Fuel, replacement parts and consumables like filters, tires and lubricants are all tax deductible when you are in business. Same applies to any shop related expense.

Yes, exactly. Once the capital equipment is depreciated, it is depreciated. That equipment has nothing to do with the consumables that you mentioned except they are used on that equipment. And yes all of that is obviously deductible.

 

[aircommuter]

My storage business is considered a passive business but it still can deduct tractors, trucks, fuel and so on just like a ranch or farm. The tax system is just a game and one needs to learn the rules if you want to play successfully.

 

[Wobblin-Goblin]

I generally think that tractors and equipment are excellent investments because they tend to hold their value fairly well (depending on certain factors, of course) AND because they provide capability to do things that otherwise might not be possible in between the time they are purchased and the time they are sold.

Having said that, I generally do not buy a tractor or piece of equipment with the intention of then selling it at some point.

 

[aircommuter]

I always view an investment as something that increases in value and yields a return.

 

[ultrarunner]

Rent verses own is always a calculation I do...

When durable goods hold value it's a plus...