Tax Write Off?

[cold1313]

Howdy guys.

I'll be ordering my H3200 in a week or two. I can decide how to take the most advantage of writing this machine off on my taxes.

I could order it under my name, my salary. Or under my LLC, which owns some farm ground, but only ~4 acres or so. So the LLC doesn't generate enough to even cover taxes.

I was just wondering which route would give me the best bang for my buck on my returns next year? If I order it under my name, I believe there are stipulations as to how the tractor is used for me to take advantage of a write off....any suggestions?

Thanks guys!

 

[Eric McCarthy]

Have a chat with your tax accountant...

 

[cold1313]

I did, a very quick one since she's slammed with taxes right now.

I didn't agree with her answer, she thought the LLC, but I don't see how that is possible to gain me the most on my return. The LLC wont generate enough to cover the property taxes, so I'm already showing it as a loss....

But I wasn't sure what I would need to do to write it off under my own taxes.

 

[Eric McCarthy]

I'm dating a gal who's a tax accountant and working on her CPA. From what I've learned a tax accountant can do a broad spectrum of taxing but sometimes you have to find one that's more tailored to suit your needs of the small farm and the LLC. That way they can get you the most deductions and find what works best for you. Basically someone who understands farming.

If I understand correctly to be able to write an equipment purchase off on your taxes as a business expense it has to be based on a business that generates enough gross profit to deduct it on.

I'm not sure in your area but here in Virginia to be considered a farm you either have to produce a crop or raise cattle on x-amount of acreage to be declared a farm. It could be that your 4 acres is to small.

 

[cold1313]

My CPA deals with all of the small town farmers, but I think this is a newer situation for her. Plus their heads are spinning this time of year.

I had a typeo, the LLC owns 10 acres, which in Ohio qualifies it for CAUV (farm tax deduction) and farming is done on the property. I personally own 4 other acres with my home on it.

My brain was thinking to write it off on my income, since it's higher than the farm (LLC)....but I think the LLC and my taxes are rolled into one, maybe that's where it doesn't really make a difference.

 

[Eric McCarthy]

It may not work out well if the LLC just doen't generate enough money for you to write it off. Here in Virginia they basically make you spend money one way or the other at the end of the year. Just to throw a number out there, let's say $30,000 is a number we're playing with. Well here you can either pay $30,000 in taxes or purchase trucks and or equipment vauled 30k and write it off that way.

Maybe your next best bet would be to talk to the dealer and see what they reccomend. If the dealer is worth their weight they'll guide you on which route to take maxizing you the most money. The dealer should be able to tell you weather or not you can purchase a tractor for your farm in your neck of the woods.

 

[Kingcreek]

I would think you would depreciate the equipment over a multi year schedule but your accountant should be able to guide you. I have a great accountant who has saved me a bunch. He is a retired IRS agent and a farmer and CPA. First time I met him I asked him if I could count on him working for me since he had worked for "the dark side". He smiled and said he wanted me to have every legal deduction possible. I don't spend money on much without running it past him.

 

[cold1313]

She said I could depreciate it over 7 years, or do a 1 time, 50% depreciation,.....or something like that.

I'm calling her tomorrow as it looks like I'll be hitting the Kubota dealership Friday!

 

[ibeamcarver]

I have a similar situation, but the farm is a sole proprietorship instead of LLC. As such, farm income/expenses come to a profit or loss (loss this year) reported on Schedule F of my regular income taxes. I am expensing 50% of the tractor cost under Section 179 and depreciating the rest.

I am not an accountant, but I play through different scenarios in Turbo Tax and this looked like the best approach for me.

 

[dtherrien]

I bought my 3200 at the very end of Dec. for the deduction. As the others have said you can take a percentage for this year and take the depreciation over 7 years on the balance. You can also take 100% if you need it. Also you can deducted your insurance, maintenance and repairs cost and anything else that has to do with the tractor (if it is being used for work) On mine i paid 50% cash and financed the balance under my name with a commercial loan.(I have a construction business with a DBA...no LLC or INC) The insurance is in with my commercial insurance. Ended up with only having to take the depreciation over the 7years with all the other deductions.