Buildings Must Be On The Depreciation Schedule!
We had a reader ask the following question:
“My husband is a full time farmer and we are currently building a tool shed that will be done by the end of 2011. Will we be able to deduct the whole cost of the building or will it need to go on a depreciation schedule. Thanks for your time.”
A new qualified farm building placed in service before January 1, 2012 is allowed to be deducted in full using 100% bonus depreciation. However, the asset must still be entered on a depreciation schedule and the resulting depreciation deduction flows through to form 4562.
The bottom line is that this deduction is still part of overall depreciation expense.
Just a reminder, a farmer only has two months left to either purchase any new equipment or construct a new farm building to take advantage of 100% bonus depreciation. For both types of assets, the asset must be placed in service before January 1, 2012. Simply purchasing the equipment and not taking delivery of the equipment will not work.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Sorry to belabor this point, but I have an additional contract.
Our farm signed a retail installment contract for a tractor on Dec. 30, 2011. The tractor however was not physically delivered to the farm until Jan. 3, 2012. From what you wrote above, I assume this means that the tractor is not eligible for 100% depreciation. Is that correct?
Thanks for the help. This is a very useful website.