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00000179-2419-d250-a579-e41d38650002Issues of food, fuel, and field affecting Illinois.

Farmers Bid Farewell To Big Expense Tax Write-Offs

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It could be yet another sign that the good times are over.

Grain prices fell in 2013 and aren’t expected to reach their former heights this year. And last year also marks, at least for now, the end of the half-million-dollar tax write-off many farmers have enjoyed. Under Section 179 of the tax code, business owners—including farmers—could claim the full cost of new equipment during the year they bought it and began using it.

“A lot of farmers will buy high-ticket items knowing that they can get a substantial tax write-off,” said Roger McEowen, director of the Center for Agricultural Law and Taxation at Iowa State University.

But as they pay their taxes for this year’s March 3 deadline (normally, it’s March 1 for farmers, but that’s a Saturday this year), farmers may be saying good-bye to that provision. As it stands right now, McEowen says, the generosity in the tax code is gone.

“It came in, it was ramped up over a number of years, then extended to go through 2013,” McEowen  said, “and now we’ve reverted back to the law as it was over a decade ago with no inflation adjustment. For 2014, it’s $25,000.”

But McEowen says by the end of this year, he expects a retroactive adjustment.

“Those in the tax profession, we’re all pretty certain that we’re going to see something reinstated. What we don’t know is the timing of it,” he said. His hunch? Congress may not do anything with this until after the November midterm elections.

“It could be December when we see something retroactive to the beginning of the year,” McEowen said, “which is horrible from a planning standpoint because you need to know what the law is so you can plan around that.”

But McEowen says in the end, Congress will likely settle on something significantly higher than $25,000, though perhaps not as high as $500,000. In the meantime, after waiting for years for Congress to decide on agricultural policy, farmers are now left waiting for tax policy.

“This has been nightmarish,” McEowen said. “It is impossible to do any long-range planning.”

Indeed, McEowen says tax lawyers can’t even advise clients on short and medium-term tax planning because they don’t know what the laws are going to be.

“That’s what’s incredibly frustrating,” he said.

Of course, with lower crop prices, farmers may be less inclined to make major equipment purchases this year anyway, sparing them some of the pain of lower write-offs.

Amy Mayer is a reporter based in Ames. She covers agriculture and is part of the Harvest Public Media collaboration. Amy worked as an independent producer for many years and also previously had stints as weekend news host and reporter at WFCR in Amherst, Massachusetts and as a reporter and host/producer of a weekly call-in health show at KUAC in Fairbanks, Alaska. Amy’s work has earned awards from SPJ, the Alaska Press Club and the Massachusetts/Rhode Island AP. Her stories have aired on NPR news programs such as Morning Edition, All Things Considered and Weekend Edition and on Only A Game, Marketplace and Living on Earth. She produced the 2011 documentary Peace Corps Voices, which aired in over 160 communities across the country and has written for The New York Times, Boston Globe, Real Simple and other print outlets. Amy served on the board of directors of the Association of Independents in Radio from 2008-2015.
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