If you placed some equipment in use in previous years but didn’t take a Section 179 deduction on it, you may be able to use that deduction this year.

"This would be a good time to consider amending the previous year(s) tax return and take up to the full Section 179 deduction," says Paul Neiffer, a CPA with Hanson NvO, who specializes in farm tax issues.

Then you might consider income averaging, which allows you to spread your farm income over four years. The Section 179 deduction would reduce the base to be used in calculating the income averaging tax. "By doing this, the farmer may be able to reduce the tax owed from the 25% or higher bracket into, in some cases, the 15% or lower bracket."

See Comments