Tax reform changes to depreciation deduction affect farmers

 

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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.