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Year-end depreciation strategies

12/17/2013 @ 12:56pm

You have at least four options for setting up depreciation claims before December 31, 2013. Next year, depending on politics influencing the continuation of bonus depreciation and Section 179 accelerated depreciation provisions, the options could be different.

The greater influence on depreciation decisions will be farm income levels. Tax brackets at 35% – or maybe even the new 39.6% rate – of net income are likely to be faced by more farmers than ever before, says Larry Gearhardt, Ohio State University farm tax specialist.

As such, it’s to your advantage to get net income below the 35% threshold if your income this past year puts you in that bracket. The next lowest tax rates are 28% and 15%. “Suppose that you’re bumped up into a 35% rate. How can you reduce that (net income) to lower your tax burden to a more reasonable level? That’s going to be the most critical factor at the end of the year regarding your income,” Gearhardt says. “How can you utilize a depreciation strategy?”

Gearhardt teaches tax advisers to try to get clients to plan ahead up to five years.

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