Some Income Tax Goodies
The American Recovery and Reinvestment Act of 2009 delivered several tax goodies for farmers and their families. Here are some of the highlights:
1. Higher Education Credits – You can now have a maximum credit of $2,500 for higher education costs and this applies for the first four years of school instead of the old two year rule. The phase-outs have been increased substantially so that most farm families will be able to take the whole credit.
2. First-time homebuyer’s credit. If you do not currently own a home and have not owned one for three years, you can now get a $8,000 rebate from the IRS. This applies to any home before December 1, 2009. The amount is 10% of the home’s price up to a limit of $8,000. It does phase out if your income is too high.
3. Making work pay credit. This credit is intended to partially offset your social security payroll taxes. The credit is limited to $400 for individuals and $800 for joint filers. If you work outside the farm for a wage, this credit will increase your take home pay, but your claim the credit on your tax return. The amount is phased-out depending on income. This credit is available for 2009 and 2010 (for right now).
4. New car sales tax deduction. If you purchase a new car in 2009, you can deduct the sales tax even if you do not itemize or claim state income taxes.
5. Bonus depreciation. The 50% bonus depreciation on new equipment purchases is extended through the end of 2009. For farmers, certain special use buildings may qualify for this bonus.
6. Section 179 expensing. This has also been extended till the end of 2009. This allows you to expense up to $250,000 of equipment purchases in most situations.
7. Carryback of small business net operating losses. If you qualify, you can now carryback your net operating loss five years instead of the normal two years. An eligible small business is if you average less than $15,000,000 in revenues over the last three years.
These are some of the tax goodies that this law is providing. As usual, you need to discuss these with your tax advisor since there can be complications that are not apparent with the above summary.
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.
Comments are closed.