Starting on Nov. 28, you have 34 days to put your 2012 tax planning strategies in place. In those same 34 days, it is possible that Congress could enact and the President could sign new legislation that might make you reconsider the tax plans you've put in place using the current tax provisions. This year more than ever be very aware of the changes that could take place prior to the end of the year that might make you re-think your tax plan. If we are fortunate, any legislated changes will occur prior to 1/1/2013 and not after.
And don't forget - while tax planning may be done one year at a time, prudent tax planning should always extend that tax plan our for two, three, or even four years to avoid any surprises in the future. That may seem like a futile exercise if new legislation is passed that will make for changes to your tax plans...but be aware and responsive to those changes. Treat the tax management aspect of your business just like you would any other part; be aware of the changes and respond to them accordingly
Today's post is a quick review of some of the federal tax provisions expiring that are pertinent to those involved in production agriculture. This list is not a complete list of expiring tax provisions.
For a more complete list of expiring tax provisions for 2012, click here.
For more on expiring tax provisions for the period 2010-2020, click here.
Expired December 2011
Lets' begin with some tax provisions that have already expired.
- The IRS Code Section 179 Expense Election of $500,000 for property purchased and placed in service (with a $2,000,000 purchase limit) expired on 12/31/2011. (This decreases to $139,000 with a $560,000 purchase limit for 2012.)
- The Special Depreciation Allowance (Bonus Depreciation) equal to 100% for property purchased and placed in service expired on 12/31/2011. (This decreases to 50% for 2012.)
- The AMT Exemption for those Married Filing Joint (single) of $74,450 ($48,450) are scheduled to decrease to MFJ $45,000 and single $33,750.
If you have been depending on the first two of these to lessen your tax liability, then your 2012 tax plan will be a bit more difficult since it will be more difficult to place more of your depreciation in the year you purchase those assets and lessen your tax liability. Both of these changes will impact the ability to lessen taxable income. Depreciation is merely a way to recover or expense the cost of capital asset purchases. Remember, general farm machinery falls into a 7-year life on your depreciation schedule.