Congress returned back to Washington this week with a whole slate of unresolved issues. From ISIS to temporary spending to expired tax provisions, this is one “Lame Duck” session where action is critical.
On the agriculture front, one of the most important issues is the Section 179 tax exemption. Pat Wolff, American Farm Bureau Federation Tax Policy Specialist, explained to Northern Ag Network in a recent interview that, while there is permanent law, it comes with a dramatically lower deduction than what was in place at the end of 2013.
Calling it “the biggest tax provision that farmers care about” in a list of 55 tax provisions that have expired, Wolff explained that the deduction at the end of 2013 was limited to $500,000 annually. Now, in 2014, that deduction limit is $25,000.
Section 179 is called “small business expensing” and it allows a small business to immediately deduct the cost of business inputs rather than having to deduct them over time. For instance, Wolf says that a farmer could deduct the whole purchase price of a tractor in a single year rather than having to deduct it out over seven years. With a $25,000 limit, that isn’t possible for many purchases.
Getting the deduction back up to $500,000 before the end of the year is critical, says Wolff, adding that farmers and ranchers will have to pay a lot in tax dollars if that doesn’t get done. What’s more, she says that this is already impacting local implements. With the uncertainty on how it will affect their tax year, farmers and ranchers are holding off on purchases.
© Northern Ag Network 2014