With farm profit margins very slim in agriculture today, financial planning is crucial to the survival of a farm operation. That planning includes tax planning for the end of the year. A tax planning publication is now available for farm families which includes many of the new ag tax rules and related information. This information will aid farm families as they prepare for the tax season.
With the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015, there were substantial changes in depreciation rules. Section 179 depreciation has been permanently established at $500,000 with a $2 million dollar overall investment limit before phase out takes place. Qualified Section 179 property includes breeding livestock, machinery, single-purpose agricultural structures and drainage tile. The qualified property can be new or used. The legislation makes permanent the rule allowing a taxpayer the ability to revoke I.R.C. Section 179 elections and any specification of property to be expensed without IRS consent. The PATH Act also reinstated bonus depreciation under a phase down schedule through 2020.
Federal and state estate exclusion rules are also outlined. The federal estate tax exclusion, indexed for inflation, will be $5,490,000 per person for 2017. The Minnesota estate tax exclusion increases by $200,000 to $1,800,000 for 2017 and the qualified farm property exclusion will be $3,200,000 for 2017. The annual federal and state gift exclusion for 2017 remains at $14,000 to any number of donees.
The publication also includes information on alternative minimum tax, disaster payments and insurance indemnity payments, repair regulations, business sale or liquidation, earned income credit plus a number of tables with applicable tax rates and related thresholds. “This information is not intended to be legal and financial advice but can give the farm family some valuable background information from which to begin” says Gary Hachfeld, University of Minnesota Extension educator. Always seek advice from a qualified professional on details specific to your situation.
The publication is available at no cost through Extension. For those who have Internet access, simply go to www.extension.umn.edu/agriculrute/business and click on “Farm Tax & Legal Issues” on the center of the page. Click on the document titled “Ag Income Tax Update for Farm Families”. For those without Internet access, contact your local county Extension office or the Farm Information Line at 1-800-232-9077 for a copy.