Understanding Bonus Depreciation

Before we dive into the eligibility of farm buildings for bonus depreciation, let’s first understand what bonus depreciation is. Bonus depreciation is a tax incentive that allows businesses to take additional depreciation deductions on qualifying assets. The Tax Cuts and Jobs Act of 2017 expanded the bonus depreciation rules to allow for 100% bonus depreciation for certain assets.

What Qualifies for Bonus Depreciation?

Not all assets are eligible for bonus depreciation. The asset must meet the following criteria:

• The asset must have a useful life of 20 years or less.
• The asset must be new, meaning it must have been acquired by the taxpayer after September 27, 2017.
• The asset must be used in the taxpayer’s trade or business.

Now that we understand what bonus depreciation is and what assets qualify, let’s answer the question at hand – are farm buildings eligible for bonus depreciation? The answer is, it depends.

Farm buildings can be eligible for bonus depreciation if they meet the criteria mentioned above. If the farm building has a useful life of 20 years or less, is new, and is used in the taxpayer’s trade or business, then it would qualify for bonus depreciation.

However, not all farm buildings will meet these criteria. For example, if a farmer purchases a used barn, it would not be eligible for bonus depreciation as it is not new. Additionally, if a farmer purchases a building that has a useful life of more than 20 years, it would not be eligible for bonus depreciation.

The Benefits of Bonus Depreciation for Farmers

For farmers who have qualifying assets, bonus depreciation can be a significant tax benefit. By being able to take additional depreciation deductions, farmers can reduce their taxable income and lower their tax liability. This can free up cash flow for the farmer to reinvest back into their business or use for other purposes.

It’s important to note that bonus depreciation is temporary and is set to begin phasing out in 2023. However, for the time being, it can be a valuable tax incentive for farmers who have qualifying assets.

Conclusion

In conclusion, farm buildings can be eligible for bonus depreciation if they meet the criteria outlined by the IRS. Farmers who have qualifying assets can take advantage of this tax incentive to reduce their tax liability and free up cash flow. As bonus depreciation is set to begin phasing out in 2023, farmers should consult with a tax professional to determine the best course of action for their business.