Existing Farm Bill here to stay, at least for another nine months

The Farm Bill was extended in a last minute effort to avoid reverting back to the 1949 Farm Bill. This extension did not include farm policy reform but rather gave Congress a deadline of September 30, 2013 to decide on new policy.

In the meantime, a majority of the 2008 Farm Bill legislation was extended minus a number of conservation and disaster relief programs that lack funding. This means that even though the programs are on the books, there is no additional funding to carry out the programs.

Conservation, disaster and emergency assistance programs have drawn the short straw in terms of funding. Many of these programs lost their mandatory funding and now receive only discretionary funding which is allocated by Congress. 

While neither the Republican side nor the Democrat side seem particularly pleased with the Farm Bill extension and a majority expressed interest in abandoning the direct payment program, the extension seemed to be the only last minute option to solve the so-called “dairy cliff” problem.

On the other hand, a significant change that came from the last minute legislation involves the estate tax that was set to revert back to 55% tax on estates valued over $1 million. Instead, with the extension, the rates rise from 35% to 40% for estates valued over $5 million. This is important to farmland estates since a few hundred acres can quickly max out the exemption.

Section 179 and Bonus Depreciation are back for one more year!

With higher deduction limits of $500,000, Section 179 has boosted its previously set limits in 2012 for the 2013 tax year. Additionally, the higher deduction limit of $500,000 will work retroactively for the 2012 tax year which was previously set at $125,000.  

Equipment purchases made in 2012, including sprayer purchases, can use the new deduction limit instead of the original $125,000.

As a reminder, the Section 179 deduction is available for use on most new and used capital equipment; however, the additional bonus depreciation is only available for us on new equipment. The bonus depreciation allows for an additional 50% tax deduction beyond the Section 179 deduction. Typically, to calculate the total deduction, start with Section 179 and then add in the bonus depreciation. The exception to this rule is when the business has no taxable profit in the given tax year.