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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Components May Qualify for 100% Bonus Depreciation

May 18, 2011

In a post a couple of days ago, I indicated that a new Ag building placed in service after September 8, 2010 but where the construction started before that date would not qualify for 100% bonus depreciation, but would qualify for 50% bonus depreciation.

There is one exception to this rule that may help farmers some.  Any unique component that can be separately determined to have commenced construction after September 8, 2010 and placed in service before the end of this year may qualify for the 100% bonus depreciation.  A unique component is any material part of the construction that can be identifiable by both the start of construction and its costs.
For example, if a farmer constructs a machine shed that starts construction before September 9, 2010, this building can only be depreciated using 50% bonus depreciation.  However, if the machine shop has an unique door system that is started after September 8, 2010, then this door can be deprecated using 100% bonus depreciation.  Another example of a component that may qualify is a feed handling system or watering system installed in a hog barn.
The farmer must elect on the tax return to use this method of depreciation on these components, so it is very important to review this with your tax advisor during construction and when preparing your tax return.
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