Farmers and ranchers who want to upgrade their equipment should begin looking before the year-end, dealer representatives say.
“If you wait until the last two weeks of the year, it’s going to be hard to find what you are looking for,” said Jason Koning, store manager at Ag West Supply in Woodburn, Ore.
Cory Carroll, general manager at the Pape dealership in Albany, Ore., pointed out that the higher limits for the Section 179 deduction that had been available expired last January.
“It allowed customers to take that depreciation up front and it’s a huge tax incentive for them,” Carroll said.
According to Melissa Carlgren, a senior tax manager at Geffen Mesher in Portland, Ore., buyers should consider taxes when making purchases, but that shouldn’t be the only factor. She said Section 179, which applies to basically any equipment, has been generous in the past. This year, the deduction has been restored to its original limits.
“For 179, it’s limited to a $25,000 deduction and that’s only if your purchases are less than $225,000,” Carlgren said. “For most farmers it’s pretty easy to exceed that limit.”
Carlgren added that the $25,000 is an income-based flat deduction that requires purchasers make at least $25,000 per year. Right now, she said, no one knows if the limits will remain reduced or be increased to 2013 levels.
“We probably won’t know what the limits are going to be until after the mid-term elections in November. They can make (any changes) retroactive to the beginning of 2014,” Carlgren said.
Another incentive farmers have had in the past that is not in effect for 2014 is the bonus depreciation for 50 percent of the cost of a new asset placed in service, Carlgren said.
According to Carroll, ag professionals should sit down with their accountant to decide whether purchasing or leasing is right for them this year.
He said leasing is more flexible: “If you lease it for five years, you’re making a payment or several payments annually into the term — you can buy it then, but you also have the option just to give it back to the manufacturer. Buying it, you’re just setting it up on a contract.”
“The lease is a true expense and you can write 100 percent of it off,” Carroll said.
Bob McKee, sales associate for New Holland dealer S.S. Equipment in Corvallis, Ore., said there are pros and cons to leasing. It usually takes less money to get into a lease than it does to purchase a piece of equipment, but you have to come up with the money for the next go-around with a rental or a lease.
He noted, however, that interest rates are typically lower for purchases than they are for leases.