Agricultural Implications of the New Tax Law

An update posted today at the Delta Farm Press Online indicated that, “Farm Credit East tax experts have reviewed the 2017 Tax Cuts and Jobs Act — the largest overhaul of the U.S. tax code in 30 years. ‘Overall, the new tax provisions will provide significant benefits to Northeast farmers,’ says Dario Arezzo, Farm Credit East senior tax consultant. ‘However, certain provisions will unfortunately limit the value for some producers.'”

Here are a few of the highlights from today’s Delta Farm Press article:

Alternative minimum tax. The AMT still remains for individuals, but exemption amounts are significantly increased and will be indexed for inflation.

State and local tax deductions. SALT deductions for state and local property plus income or sales taxes are limited to $10,000 annually.

Section 179. Beginning with the 2018 tax year, farmers will be allowed to immediately write off capital purchases such as breeding livestock, farm equipment and single-purpose structures (such as milking parlors) up to $1 million. The phase out on this expensing provision doesn’t kick in until a farm reaches $2.5 million in purchases.

Bonus depreciation. Farmers will be able to write off 100% of qualified property purchased after Sept. 27, 2017 through 2022 (at which point a phase-down occurs). The new law expands bonus depreciation to include new and used property purchased or constructed, and to plants bearing fruits and nuts.

Section 199 repealed, replaced. The Domestic Production Activities Deduction has been repealed. As a result, many cooperatives accelerated that pass-through deduction to patrons before the end of 2017.

Ag and horticultural cooperatives will have a new 20% deduction. It’ll be beneficial for reducing cooperative income. However, unlike the DPAD, this is taken at the cooperative levels and isn’t directly passed on to patrons.

Estate tax. The federal estate tax exemption rates double to $11.2 million per individual ($22.4 million for married couples) in 2018.

Breweries, distilleries and wineries. Alcohol manufacturers will enjoy a two-year excise tax reduction. The credit against the wine excise tax was also expanded, and sparkling wine producers are included.

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