For many farmers, especially small, family-owned operations, buying new equipment is not always economically feasible. This can present problems for farmers since they could be working off older equipment. This equipment can become unsafe and inefficient.If farmers were able to have more money in their tax returns, they could then put that money toward newer, safer vehicles and equipment.At a recent press conference at Hudson River Tractor Company in Fultonville, NY, U.S. Senator Charles Schumer announced plans to change federal tax incentives for farmers. His goal with these changes is to cut costs and raise profits for farmers across America.
“What is one big cost our farmers have?” Schumer asked. “Equipment.”
The senator held the event to get the word out about the Agriculture Equipment and Machinery Depreciation Act. This bipartisan bill focuses on changing section 168 of the Internal Revenue Code. The current tax plan for equipment incentives gave farmers depreciation deductions over the course of seven years. If this new bill passes, it would change that deduction timeline to just five years.
Senator Schumer stated that the bill’s incentive changes would help farmers recoup costs from purchasing new equipment faster.
“The length of the depreciation doesn’t match the time the equipment is used for. Farmers don’t get a full tax break like any other business person would get,” Schumer explained. “This tax code is outdated.”
He explained during the presentation that this shortened timeline would be advantageous for farmers and businesses alike.
“Allowing them [farmers] to take advantage of the depreciation tax deductions in a shorter timeframe would be good for business,” he said. “Having more cash on hand, and sooner, would be a boon for farmers.”
Tory Northup, Chief Operation Officer of Hudson River Tractor, agreed with the senator.
“It helps. It’s a step forward,” he said. “It will also help the economic picture, whether it is my business or someone else’s.”
In addition to the Agriculture Equipment and Machinery Depreciation Act, Schumer used this opportunity to discuss another important piece of legislation. The Senate Finance Committee, which Schumer is a member of, is working on reestablishing an extension of the Section 179 tax provision. This provision also helps farmers to recover the costs of buying new pieces of equipment.
At the current time, this provision allows a small business to expense the cost of new or used equipment. Only certain farm equipment is covered under this, but one can expense the cost up to $25,000, with a $200,00 phase-out threshold. By reinstating the Section 179 extension for 2015 and 2016, the expense limit would increase to $500,000 with a $2 million phase-out threshold.
The reorganization of these tax codes is part of an effort, Schumer says, to “provide farmers more financial certainty.”
Knowing these efforts will be in place for them hopefully will lead to farmers replacing their equipment faster and avoid the pitfalls of operating out-of-date gear.
“You’re gambling,” Schumer said, in reference to using old, broken equipment. “That’s a gamble that you shouldn’t have to make.”