Farmers have until December 31, 2009, to take advantage of the accelerated depreciation schedule for most farm equipment. The bonus depreciation measure (which reduced the depreciation schedule for most ag equipment from seven to five years) was extended until the end of 2009 under the economic stimulus package passed this year.

There is certainly no guarantee the accelerated depreciation schedule will be extended again, says Paul Kindinger, president and CEO, North American Equipment Dealers Association (NAEDA). In fact, the measure almost did not pass this year. If the new economic stimulus package works, Congress will likely have less enthusiasm for an accelerated depreciation tool because it costs the U.S. Treasury and is supposed to be a temporary tool, Kindinger says.

Pre-tax planning

Some farmers are aware of the accelerated depreciation schedule and will buy if they see good deals on machinery this year, says Steve Kayton, general manager, Nebraska Equipment, a Case IH dealer in Seward, NE. “Most farmers will be made aware of it after harvest when they have their pre-taxes done with their CPAs. With grain prices going up, I'm sure there will be farmers in a tax bind again this year.”

As fall rolls around and tax time gets closer, farmers will take into account accelerated depreciation. “It's one of the factors in their decision making, and it's probably the one thing that will tip the deal in the farmer's favor,” agrees Cecil Anderson, manager, Titan Machinery of Thief River Falls, MN. The dealership sells Case IH and New Holland equipment.

The accelerated depreciation schedule definitely helps farmers who have had some good financial years recently and would rather invest income in new equipment than pay it in taxes, says Boyd Mitchell, general manager, Mitchell Equipment, a Case IH dealer in Atkinson, NE. NAEDA's Kindinger agrees, noting that 2009 net farm income is expected to be the third or fourth largest in U.S. history.

Equipment sales

Although grain prices have not been bad, Steve Marcus, owner/manager, Olsen Implement, a New Holland and AGCO dealership in Huron, SD, has observed a slowdown in equipment sales. With the media focus on the recession as well as credit concerns, farmers are being more conservative, Marcus says. He adds that some farmers may not know about the extension of the accelerated depreciation schedule so his company has been promoting it.

To find out how your operation might benefit from the accelerated depreciation schedule, contact your local CPA or tax attorney.