New IRS Tax Regulations Affect Farmers

Progressive Dairyman is rated as a top industry-specific publication. The magazine provides important dairy industry news to over 27,500 subscribers each year.

Jeff Baker of Baker Wealth Management recently wrote an article for the publication regarding the new IRS tax regulations that will impact dairy farmers in 2015. This post highlights key components of that article, which can be found here.

Changes in IRS Tax Regulations

Recent changes to tax regulations for farmers required that taxpayers make the election on their 2014 tax return and file a form 3115. Changing the accounting method usually requires payment of a fee, but this fee was waived by the IRS since they made the change mandatory. These tax regulation changes are related to the way equipment and building repairs or improvements are taxed.

Capitalizing These Expenditures

Under the new IRS regulations, three types of expenditures have to be capitalized:

• improvements to a piece of equipment or a building
• adaptations to a piece of equipment for new use
• expenses related to restoring a piece of equipment

What Determines Deductions?

Under these new guidelines from the IRS, the deciding factor in determining a deduction is the purpose of the repair. If repair is necessary for a piece of equipment to remain in normal operating condition, it will be deductible if the need for repair was caused by the use of the equipment.

Repairs or improvements on buildings that do not exceed the smaller of 2 percent of the original cost of the building or $10,000 are deductible in the year they are made. Those that are higher than that amount must be capitalized and written off over the useful life of the building.

Tax Advice for Farmers

Baker Retirement & Wealth Management, P.C. has been serving farmers in the greater Evansville area for nearly thirty years. With dairy and grain farming clients in Newburgh, Boonville, Chandler, Evansville, Jasper, and beyond, we provide targeted advice for the needs of your operation. If you need advice about your farm’s taxes, contact Baker Wealth Management at 1-866-244-3517.