Section 179 is an important deduction for farmers with few updates going into 2017. The only change currently is the index to inflation. This will increase to $510,000—a $10,000 bump. Of course, with President-elect Donald J. Trump and a Republican majority House and Senate, Paul Neiffer, CPA with CliftonLarsonAllen and author of The Farm CPA blog on AgWeb, says some level of tax reform should be expected.
Neiffer thinks farmers could possibly see Section 179 double to $1 million—still indexing to inflation—and farmers being allowed to expense all capital expenditures (excluding land). Only time will tell whether these changes will come to fruition in the years to come but it’s certainly something to keep eyes on, he says.
But when is Section 179 not allowed as a deduction? Answer: The FSA office.
Despite whether these changes happen or not, there are two key issues farmers need to be aware of when it comes to dealing with the farm bill and Section 179 is at the top of that list.
The first issue farmers are dealing with when it comes to the FSA is the current verbiage in the FSA handbook regarding Section 179 for entities. According to the handbook, Section 179 is not allowed as a deduction. This will impact your adjusted gross income (AGI) and could leave you writing a check instead of collecting one.
The other issue farmers might not be aware of is that if you set up any type of entity—even if it’s disregarded for income tax purposes—the FSA regards it as a legal entity, which requires an employer identification number (EIN). An EIN is not required to do your taxes, but it might be required when you file any paperwork with the FSA office. Neiffer suggests getting it now to save time (and headaches) later.
Paul Neiffer explains: