On Dec. 22,
President Donald Trump signed the Tax Cuts and Jobs Act. Farmers are
beginning to find out what those cuts might mean to those in
While Rep. Paul
Ryan, Treasury Secretary Steven Mnunchin and the president have
touted using a postcard-sized form for filing tax returns, farmers
may find the process a bit more involved.
owns Mighty Grand Dairy in Union Grove. He milks 575 dairy cows and
farms about 1,200 acres.
While he works
with an accountant, he does the day-to-day bookwork on the farm.
about what changes in the tax laws may mean to him, but will leave
the heavy lifting to his financial advisor and urges others to do
One portion of
the Act he’s been studying is Section 179.
According to a
University of Nebraska-Lincoln online article by Tina Barrett,
executive director of Nebraska Farm Business Inc., the new law
doubles the Section 179 deduction from $500,000 to $1 million and
raises the purchase phase out to $2.5 million.
producers weren’t reaching the maximum deduction when it was
$500,000, this is not a major change,” Barrett said in the article.
that increase may be beneficial to those purchasing big-ticket
machinery or adding a building. While those deductions can be used
the first year, he said it is also possible to depreciate the
investment over a five- to seven-year period.
depreciation has been reinstated, Barrett said, at a rate of 100
percent, but only through 2022.
is a 20 percent deduction of qualified business income available to
owners of passthrough entities. Daniels said for the most part,
farmers are passthrough entities because income generated on a farm
is “passed through” to a single owner — the farmer.
pass-through business income has generated much discussion and the
final regulations “will be interesting” as they are unveiled.
income exempted from the estate tax — the amount an individual can
leave to heirs without having to pay federal taxes — has been bumped
from $5 million to $11 million, but that portion of the Act is only
in effect until 2025.
Since the date
of one’s death is usually unknown, it is difficult to plan on
passing on anything more than $5 million, Barrett said.
Daniels said the
increase may be beneficial to larger farms and ranches in western
states — or Racine County — where Foxconn turned farmland into
incredibly valuable property.
“Not a lot of
farms will benefit, but the ones that do will be able to keep those
farms in their families instead of having to sell off a portion to
pay the estate tax,” Daniels said.
although there has been a push toward using accrual principles, the
Act allows farmers to keep using cash accounting.
He said using
accrual principles means, for example, a grain farmer would have to
claim both expenses and income from a crop in the same year it was
grain may be kept into the following year for other reasons,
including hopes that it might bring a higher price.
accounting, he can claim the income when he sells the crop instead
of the year he grows it,” Daniels said.