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Implement Alley Discussion Forum

Implement Tax Depreciation

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ClemBert

03-18-2006 15:15:56




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I"m in the process of doing my federal tax return. In 2005 I purchased a new bale spear for $600. Also, I purchased a used airless paint sprayer for $2000. Can someone give me an idea of what kind of depreciation schedule I should use for each item?




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Formerly PaMike

03-19-2006 13:36:30




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 Re: Implement Tax Depreciation in reply to ClemBert, 03-18-2006 15:15:56  
GO TO AN ACCOUNTANT NOW! They know all the tricks. You can take section 179 and take all the depreciation this year if you need it, or you can do a declining balance. There are all kinds of tricks.



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paul

03-19-2006 10:00:59




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 Re: Implement Tax Depreciation in reply to ClemBert, 03-18-2006 15:15:56  
As mentioned, you can take it all this year, or spread it out over several future years to help with future incomes. Can"t tell you which to do without knowing your whole tax needs.....

Also as mentioned, a good CPA will help a farm situation far, far more than their cost. You are missing out without a _good_ CPA that knows farm tax law. In farming, you need to use the tax laws to make your profit, bet there is much you are missing.

--->Paul

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Dave H (MI)

03-19-2006 06:38:31




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 Re: Implement Tax Depreciation in reply to ClemBert, 03-18-2006 15:15:56  
You can write those off entirely in year one under IRC 179. If you are already in a loss situation you might want to use traditional depreciation methods (MACRS) to carry that forward into years of income to reduce your tax liability then. I do that on a lot of returns because I want the write off to go against SE income next year as opposed to increasing a loss. Lots of variables but that is how we do it. Get someone who will work for you and think around the corners. A good CPA is an asset as posted previously.

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JMS/MN

03-18-2006 21:13:45




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 Re: Implement Tax Depreciation in reply to ClemBert, 03-18-2006 15:15:56  
If you are a legitimate farmer, you file a Schedule F for farm income or loss. You maintain a depreciation schedule of all eleigible machinery, equipment, land, buildings, tiling, etc. Normally those purchases are entered on the depreciation schedule according to their useful life, minus salvage value, and the difference is what is depreciated over those years. In recent years you can EXPENSE the total cost of certain items in the year of purchase, rather than depreciate them over a number of years. It is an either/or situation- you cannot do both. Curent annual expense limitation is over $100 grand. It has been raised in recent years. Back in 98 it was about 13 grand. If your purchases are legitimate farm expenses, you can write them off now or depreciate them over their useful life.

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kyhayman

03-18-2006 20:27:46




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 Re: Implement Tax Depreciation in reply to ClemBert, 03-18-2006 15:15:56  
When I did my own, if I had those items with an '05 purchase I would take the straight line, half year convention, 7 year class life. I have no idea if thats right or not and for 10 yrs now have used a CPA. She charges me $275 for a fairly complicated return (itemized deductions, schedules C,D,F, sales and purchases of real estate, stocks, and farm items, fuel taxes, and conservation expenses)plus local and state. When I did mine I varied between paying a few hundred to getting a couple of thousand back. With her doing it and maximizing my deductions she typically gets me at least $5K back fed and over $1K state.

I used to think it was crazy for me to pay someone to do this. After all I rationalized, I've got 2 graduate degrees in an ag field, and have great records and software. Its still good money spent.

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IaGary

03-18-2006 20:00:15




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 Re: Implement Tax Depreciation in reply to ClemBert, 03-18-2006 15:15:56  
Depending on your income you can write it off the first year if you want I believe.
We do here in Iowa anyway.
But I'm no accountant.



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