- DTN Headline News
Wednesday, February 21, 2018 11:40AM CST
By Rod Mauszycki
DTN Tax Columnist

With Andy Biebl's retirement, I wanted to take a quick moment to introduce myself. My name is Rod Mauszycki. I'm a principal at CliftonLarsonAllen and my focus is on agribusiness taxation. Although I have big shoes to fill, I hope you find my articles as insightful as Andy's were.


Today I'd like to discuss the changes to depreciation. As you may know, in 2017 you could take up to $510,000 of Section 179 (subject to phase out) on new and used equipment, and 50% bonus depreciation on new equipment. The asset must be placed in service by the end of the tax year.

The Tax Cuts and Jobs Act significantly changed how agribusiness looks at depreciation. Starting with Section 179, the new legislation increased expensing limits to $1 million with the phase-out starting at 2.5 million. It also increased the property eligible for Section 179 to include property used predominantly to furnish lodging, roofs, HVAC, and fire/security systems. One benefit in using Section 179 is the ability to amend and revoke during the period open under the statute of limitations.

Bonus deprecation was one of the few items in the new law that applies retroactively. Bonus depreciation will increase to 100% for property acquired and placed into service after Sept. 27, 2017. Unlike before, bonus now applies to both new and used property. However, used property that was acquired from related parties or a decedent will not be eligible for bonus depreciation. Bonus will be phased out at 20% increments starting in 2023.

Under the new law, annual depreciation limits on passenger autos increase significantly. The first year is $10,000, second year is $16,000, the third year is $9,600, and $5,760 thereafter until fully depreciated. However, if the auto weighs less than 6,000 pounds, the deduction is limited to the lesser of the amounts above or depreciation that would have been computed under normal depreciation. This may result in unforeseen consequences so the IRS has put in place a safe harbor. If the auto weighs more than 6,000 pounds, you can fully depreciate using bonus depreciation.

Farm depreciable lives have been shortened under the Act. Prior, farm equipment typically had a seven-year life. Under the Act, new farm equipment placed in service after Dec. 31, 2017 will have a five-year life. Used farm equipment will continue to have a seven-year life. In addition, 200% declining balance method becomes the default. However, for 15- or 20-year property or upon election, 150% declining balance is still available.

One interesting retirement planning technique that opens up due to the changes in depreciation is the expanded use of Charitable Remainder Trusts (CRT) upon retirement from farming. Using Section 179 limits the ability to contribute assets to a CRT without tax consequences. A farmer could use the expanded bonus depreciation, instead of Section 179 to avoid the adverse tax consequences. This could supersize their CRT and defer additional income for two to 20 years.


Editor's Note: Tax Columnist Rod Mauszycki is a CPA and tax partner with the accounting firm of CliftonLarsonAllen, in Minneapolis, Minnesota. Send questions to taxman@dtn.com


blog iconDTN Blogs & Forums
DTN Market Matters Blog
Editorial Staff
Friday, February 23, 2018 11:04AM CST
Friday, February 16, 2018 10:58AM CST
Monday, February 12, 2018 11:39AM CST
Technically Speaking
Darin Newsom
DTN Senior Analyst
Monday, February 19, 2018 9:32AM CST
Sunday, February 11, 2018 12:33PM CST
Sunday, February 11, 2018 12:31PM CST
Fundamentally Speaking
Joel Karlin
DTN Contributing Analyst
Thursday, February 22, 2018 10:53AM CST
Wednesday, February 21, 2018 10:55AM CST
Tuesday, February 20, 2018 12:55PM CST
DTN Ag Policy Blog
Chris Clayton
DTN Ag Policy Editor
Wednesday, February 21, 2018 8:35PM CST
Tuesday, February 20, 2018 3:05PM CST
Friday, February 16, 2018 6:37PM CST
Minding Ag's Business
Editorial Staff
Friday, February 16, 2018 4:14PM CST
Monday, February 12, 2018 12:51PM CST
Friday, February 9, 2018 9:39AM CST
DTN Ag Weather Forum
Bryce Anderson
DTN Ag Meteorologist and DTN Analyst
Friday, February 23, 2018 3:02PM CST
Thursday, February 22, 2018 3:05PM CST
Monday, February 19, 2018 10:36AM CST
DTN Production Blog
Pam Smith
Crops Technology Editor
Thursday, February 8, 2018 3:39PM CST
Friday, January 5, 2018 3:40PM CST
Tuesday, December 19, 2017 3:57PM CST
Harrington's Sort & Cull
John Harrington
DTN Livestock Analyst
Friday, February 2, 2018 3:53PM CST
Friday, January 19, 2018 1:19PM CST
Thursday, January 11, 2018 4:13PM CST
South America Calling
Alastair Stewart
South America Correspondent
Friday, February 23, 2018 2:08PM CST
Friday, February 23, 2018 2:05PM CST
Thursday, February 22, 2018 3:09PM CST
An Urban’s Rural View
Urban Lehner
Editor Emeritus
Thursday, February 22, 2018 5:33PM CST
Wednesday, February 14, 2018 1:07PM CST
Monday, February 5, 2018 10:24AM CST
Machinery Chatter
Jim Patrico
Progressive Farmer Senior Editor
Friday, February 23, 2018 5:57AM CST
Friday, February 16, 2018 9:49AM CST
Friday, February 9, 2018 12:18PM CST
Canadian Markets
Cliff Jamieson
Canadian Grains Analyst
Friday, February 23, 2018 5:18PM CST
Thursday, February 22, 2018 4:47PM CST
Wednesday, February 21, 2018 4:04PM CST
Editor’s Notebook
Greg D. Horstmeier
DTN Editor-in-Chief
Friday, January 19, 2018 5:45PM CST
Wednesday, January 3, 2018 11:53AM CST
Tuesday, September 26, 2017 8:30AM CST
Copyright DTN. All rights reserved. Disclaimer.
Powered By DTN