First – my disclaimer, I am not a tax professional of any kind. If you feel any of the information in this post may be helpful in your circumstance, please share it with your tax advisor, The educated advice of a professional may be utilized to make an educated decision if you are planning to build one or more farm buildings.
Due to the passage of the new tax law (as opposed to jumping off the fiscal cliff) at the end of 2012 questions have arisen about Section 179 and bonus depreciation.
General farm buildings such as machine shops, barns, etc. are NOT allowed for Section 179. However, single purpose structures such as a hog confinement facility are allowed to be deducted under Section 179. Newly constructed farm buildings are allowed to use 50% bonus depreciation in 2012 and 2013. This provision is eliminated for 2014 (of course subject to change by Congress).
The mechanics of how these rules interact is Section 179 must be taken first, then bonus depreciation second, and regular depreciation on what is left.
Planning on building a new shop or other farm building in 2013?
The net deduction will be about 52% of the cost to build!
For farmers – think of 2013 as being a bonus year in which to get new qualifying farm buildings up and into operation. With the economy strengthening, it could very well be this is an opportunity which will never be repeated.
Get with the appropriate tax advisors – before it is too late. See if this affords the chance to really make a difference in the farm’s bottom line in 2013.