Tax Planning Tips

Unfortunately, many of the tax breaks in the new law are not permanent due to budget constraints. This will make it even more important that you get sound tax advice. These new tax breaks put money in your pocket only if they are understood and claimed! There is a lot of "timing" implications associated with this tax act that should be considered.

Discussion Points:

• The amount of capital purchases that qualify for immediate expensing will be increased from $25,000 to $100,000. Many producers may still decide to depreciate their eligible capital purchases but this will add flexibility to how much they want to take as expense against their income.
  
• Beyond the $100,000 of direct expensing that may be elected, a taxpayer can elect to take bonus depreciation of 50% of any remaining newly purchased farm vehicles, machinery, buildings or livestock. This percentage was previously set at 30%. So if a producer buys $200,000 of eligible capital purchases this year, they can potentially write-off $150,000 on their tax return this year.
  
• The capital gains top tax rate has been reduced from 20% to 15%. Lower income taxpayers will pay a maximum of 5%. This change will reduce the tax burden on the sales of raised breeding livestock or land sold for a gain. The rate has been lowered by 5%.

• All income will be taxed at lower rates for partnerships and individuals.
• Bigger standard deduction for joint filers.
• Bigger alternative minimum tax (AMT) exemptions.
• Boosted child tax credit, partially refundable for 2003.
• Reduced taxes on dividends.

Farm Credit Services tax specialists are up to date on the latest tax rules and are prepared to suggest how you can save money. We can give you an idea of what changes are in store for future years, and why tax and financial planning has become increasingly complex and more important than ever before. Contact the FCS Tax and Accounting department at 800-660-1765 for a tax planning appointment this fall.