The Economic Stimulus Act of 2008 may save you big bucks when tax time comes around.
"The direct expensing maximum limit increased to $250,000 for tax years that begin in 2008—it was $125,000 in 2007,” says Larry Burton, TelFarm manager and Extension educator for Michigan State University. An additional 50% bonus depreciation is also required for new property this year, he adds.
Eligible property includes farm machinery and equipment, single-purpose livestock buildings, drainage tile and pickups with more than 6,000 lb. gross vehicle weight.
Here's how it works: If you purchased a new combine for $300,000 this year, $250,000 can be taken as a direct expense. The remainder is left for normal depreciation.
"Bonus depreciation is 50% of the remaining cost of $50,000, or $25,000,” Burton says. You would also be able to depreciate a portion of the remaining $25,000. On seven-year property such as combines, the first-year deduction on $25,000 equals $2,678.
"Our $300,000 combine is allowed a first-year total maximum depreciation of $277,678 ($250,000 plus $25,000 plus $2,678),” Burton says.