As the year winds down, the window of opportunity to impact your farm’s year-end tax liability closes. Fortunately, there’s still time to make adjustments. The resulting peace of mind can make your New Year’s celebration much more enjoyable.
The basic management guideline is to avoid wide fluctuations in taxable income from year to year.1 This helps ensure you benefit from available credits, resulting in the lower income tax. And knowing where you stand today is much better than a Tax Day surprise.
Start by consulting your tax adviser to determine whether you might benefit by taking steps to even out your income. If your 2015 income needs a boost, consider making crop or livestock sales before year-end and delaying the purchase of supplies, such as seed, fertilizer, repairs, etc. In contrast, if you could benefit by reducing this year’s income, defer crop or livestock sales until 2016, and look for opportunities to pay for expenses this year.
Depending on your situation, increasing expenses through business-related purchases at year’s end can be a good option — especially for next year’s necessities or upgrades. Equipment purchases can provide valuable deductions via the Section 179 expense election. 2 Here are some options:
- Stock up on parts and supplies, such as belts, tires, oil, lubricants and filters
- Purchase pre-owned equipment — go with the reliability of our Certified Pre-Owned* program
- Buy new— talk to your Case IH dealer about our full product line
- Replenish farm-office equipment and supplies, and add or upgrade computers, printers and data storage
- Contribute to a retirement plan
If you’d like to encourage congress to consider legislation that will renew pro-growth federal tax provisions, including those important investment incentives like enhanced Section 179 expensing and bonus depreciation, visit the Case IH “Take Action” page. Here you’ll be able to send a pre-drafted email to your representative and senators urging them to act quickly to pass tax “extenders” legislation.
Year-end tax planning is an important annual business activity that can impact your finances long-term. But you must act before Jan. 1. Doing so can help put your operation in a better position heading into the new year.
*Case IH Certified Pre-Owned program applies to late-model (no more than five years old) (i) Axial-Flow® combines with fewer than 1,500 engine hours and (ii) Steiger® and Magnum™ tractors with fewer than 2,000 engine hours. See your authorized Case IH dealer for additional details.