Tax reform changes to depreciation deduction affect farmers

October 31, 2018

The Tax Cuts and Jobs Act changes how farmers and ranchers depreciate their business property.

Here are changes to depreciation that affect farmers:

  • New equipment and machinery is five-year property.
     
  • Used equipment remains seven-year property.
     
  • The 150-percent declining balance method is not required for property used in a farming business and placed in service after December 31, 2017.
     
  • New and certain used equipment purchased during the tax year qualifies for 100 percent first-year bonus depreciation.
     
  • Businesses that elect out of the interest deduction limit must use the alternative depreciation system to depreciate any property with a recovery period of 10 years or more.