Under tax changes for 2003, an acceleration in the amount of depreciation that can be taken on a new piece of equipment gives a great deal of flexibility.
In 2002, there was a 30 percent bonus depreciation on federal income taxes that could be applied to new equipment and building purchases. That 30 percent level is still in place, but another level of 50 percent has been added on new purchases made after May 5, 2003.
There is also what's called a Section 179 deduction that is appropriate for equipment but not buildings that are new or used but new to the purchaser. So it gives a great deal of flexibility to anyone doing tax planning.
Other changes can impact farmers and non-farmers.
There is a higher child tax credit this year, income tax brackets have been changed, and the standard deductions for people who do not itemize are higher.
Self-employed farmers who pay for their own health insurance can deduct 100 percent of their premium from their taxable income.
Participation in many types of retirement plans also can reduce taxable income.
Incoming averaging over a three-year period is also available for farmers and provides another option to lower taxes by placing them into a lower tax rate bracket than where a single year's income will place them.
As farmers begin the process of reviewing their records, remember that the tax rules are complex and farmers would benefit from consulting with tax planners to help in the decision process.
Lesson learned
Grandma watched her grandson eat his soup with the wrong spoon, grasp the utensils with the wrong fingers, eat the main course with his hands and pour tea into the saucer and blow on it.
"Hasn't watching your mother and dad at the dinner table taught you anything?"
She asked.
"Yeah," said the boy. "Never get married."
Jerry Little is Boyle County extension agent for agriculture and natural resources.
