Components May Qualify for 100% Bonus Depreciation

In a post a couple of days ago, I indicated that a new Ag building placed in service after September 8, 2010 but where the construction started before that date would not qualify for 100% bonus depreciation, but would qualify for 50% bonus depreciation.

There is one exception to this rule that may help farmers some.  Any unique component that can be separately determined to have commenced construction after September 8, 2010 and placed in service before the end of this year may qualify for the 100% bonus depreciation.  A unique component is any material part of the construction that can be identifiable by both the start of construction and its costs.

For example, if a farmer constructs a machine shed that starts before September 9, 2010, this building can only be depreciated using 50% bonus depreciation.  However, if the machine shop has an unique door system that is started after September 8, 2010, then this door can be deprecated using 100% bonus depreciation.  Another example of a component that may qualify is a feed handling system or watering system installed in a hog barn.

The farmer must elect on the tax return to use this method of depreciation on these components, so it is very important to review this with your tax advisor during construction and when preparing your tax return.

  • Principal
  • CliftonLarsonAllen
  • Yakima, Washington
  • 509-823-2920

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 Yakima, Washington, as well as a regular speaker at national conferences and contributor at Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives a combine each summer for his cousins and that is what he considers a vacation.

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