Economic Stimulus Act addresses deductions, depreciation
Farmers stand to benefit from the incentives the U.S. government is putting in place to help stimulate the economy as part of the Emergency Economic Stabilization Act.
Notably, key provisions of the Economic Stimulus Act of 2008 have been extended in to 2009:
* The Section 179 deduction limit continues at $250,000.
* The Section 179 maximum investment limitation continues at $800,000. The Section 179 deduction is phased out for each dollar of purchases exceeding $800,000.
* The first-year, 50 percent bonus depreciation allowance continues.
Also, most farm equipment can be depreciated faster beginning in 2009. Most farm equipment depreciation is reduced from seven years to five years. This includes any machinery or equipment (other than any grain bin, cotton ginning asset, fence or other land improvement) used in a farming business where the original use begins with the taxpayer after Dec. 31, 2008, and is placed in service before Jan. 1, 2010.
Together, these incentives can generate substantial depreciation deductions, as the charts show.
"New capital equipment sales are a key component of a strong U.S. economy, which is why the government is introducing more ways to stimulate sales," said Tim Biewer, director of marketing for CNH Capital.
New equipment purchases have long been accepted as a good way to reduce taxable income and income taxes, especially in high-income years. This newest incentive lets you depreciate equipment faster and, as a result, potentially realize higher deductions each year.
There are other factors favoring new equipment purchases:
* Warranty coverage on new equipment eliminates the potential of major unexpected repair costs.
* New equipment brings improvements in productivity, efficiency and operator comfort, helping you realize more value from the investment.
If you are in a position to benefit from reduced tax payments through new equipment purchases, you should consult with your tax adviser to identify the estimated net financial impact new equipment purchases would have in your operation for 2009 and beyond.
"Using the tax-advantaged opportunities available to you is part of good financial management," Biewer said.
This article was developed in cooperation with CNH Capital.
CNH Capital provides a comprehensive range of services, including wholesale and retail financing, leasing, insurance, asset management and revolving lines of credit, for the global marketplace.
Building on more than 50 years' experience in the equipment finance industry, CNH Capital is helping Case IH dealers and well over half a million customers throughout North America, Latin America, Europe and Australia.
CNH Capital and Case IH dealerships do not provide tax, legal or accounting advice.
Customers are strongly encouraged to seek their own professional advice on the proper treatment of these transactions.