What Happens If Bonus Depreciation Stops?

Published on: 06:44AM Feb 06, 2012

At the Top Producer Seminar last week, I received several questions about my opinion on whether Congress will extend bonus depreciation or increase it from 50% to 100% for 2012. President Obama has already proposed increasing it to 100% for 2012; however, a more major issue is what happens if bonus depreciation stops.

In reviewing several of the farmer tax returns that I have been working on lately, I have noticed that most of them are running out of any depreciation except for what they get from placing equipment in service in the current year. Therefore, if Congress suddenly stops bonus depreciation in 2013, many farmers will be in the situation of having little or no depreciation deductions, large equipment loan payments and much higher income taxes. This is what I would call a triple whammy.

I think if the bonus depreciation is eliminated, it will be over a couple of years to give the farmer enough time to plan accordingly or the Section 179 deduction will be adjusted back to the $500,000 range. However, we are dealing with Congress and the President, so any prediction is not worth much at this point in time.

If you have never been to a Top Producer Seminar, you should go. It is both informative and entertaining and is well worth attending.