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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.

We Answer a Question Regarding Deducted a Used Tractor Purchase in 2010.

Dec 26, 2010

One of our readers asked the following question:

"If I purchase a (used) tractor by the end of this year what percentage will I be able to write off? "

This is one those questions where the answer is: IT DEPENDS.

When purchasing a used tractor, the farmer must first decide if they want to take the Section 179 deduction on the tractor.  This deduction for 2010 can be as high as $500,000 and it applies to both used and new equipment.  There are two limitations on the deduction:

  1. The farmer must have taxable income from farm operations and other businesses at least equal to their planned Section 179 deduction (including most wages that they earn), and
  2. They must not purchase more than $2 million in equipment for 2010.  Purchases above this amount start to reduce the Section 179 deduction dollar for dollar.

 

In the case of this farmer, as long as the farm is profitable and net income from farming and after other depreciation is more than the cost of the tractor, then the farmer will be able to completely deduct the cost of the tractor in 2010.  Any amount not deducted under Section 179 will be depreciated over 7 years.

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