Take Advantage of Stimulus Money –
Now is the Time to Renovate your Barn

In February 2009, The Economic Stimulus Act, Section 179 was signed into law by President Obama. This latest act contains provisions that will benefit and impact both the horse and agricultural industries.

The measure contains two important incentives that will allow a bigger write-off for horses and other depreciable property purchased and placed into service during 2009. The benefits were part of the 2008 tax stimulus package, but expired at the end of 2008. The reinstatement should provide people with the incentive to purchase horses, new or used equipment, and property improvements for their business activities.

Increase of the Section 179 Expense
The first incentive allows an owner who purchases horses and/or other depreciable property that has a life of less than 20 years and places them into service in 2009 to expense up to $250,000 of the cost. Once total purchases of horses and other eligible property reaches $800,000, the expense allowance goes down one dollar for each dollar spent on the eligible property over $800,000.

How does Section 179 help horse owners? Typically, if horses or property for your horse business has a useful life of more than one year, the cost must be spread across several tax years as depreciation with a portion of the cost deducted each year. But there is a way to immediately receive these income tax benefits in one year. The provisions of Section 179 allow horse businesses to fully expense tangible property in the year it is purchased.

Eligible Property. The expensing allowance applies to horses, farm/stable equipment and most other depreciable property, whether new or used, such as trucks, trailers, and tractors purchased and placed into service in 2009. However, it would not include buildings such as barns or stables.

Bonus Depreciation

The second incentive of the Economic Stimulus Act of 2009 brings back 50% first-year “bonus depreciation” for horses and most other depreciable property purchased and placed in service during 2009. “Bonus depreciation” was first passed in 2002 but had phased out at the end of 2004. Bonus depreciation helps horse businesses by allowing them to depreciate 50% of horses or property in the first year the horse or property is purchased or placed in service instead of depreciating smaller percentages of the property year after year. There is no limit on the amount of bonus depreciation that can be taken in any one year.

Eligible property. Bonus depreciation applies to horses or any other property with a useful life of 20 years or less. Also, the property must be “new”, meaning the original use of the horse or other property must begin with the taxpayer to be eligible.

State and Local Sales Taxes
Other newly added provisions include a deduction for state, local, and excise taxes on the purchase of new cars, lights trucks, and recreational vehicles. It does not apply to taxpayers whose adjusted gross income is $125,000 or more or to those filing a joint return.

Net Operating Losses
The new law also allows net operating losses to be carried back 2 years before the operating loss occurs and carried forward 20 years after the loss. Small businesses with a gross revenue of $15 million or less will be allowed a carry-back period of 5 years.

Estimated Tax Payment Relief
Additionally, the Stimulus Bill reduces the 2009 required estimated tax payments for some small businesses.

All the above tax incentives will help horse businesses increase income by providing a tax relief for activities they are currently conducting. They should also provide an incentive for new or existing businesses to buy more horses and other related property. Now is the time to replace those tired and abused stall fronts and feeders with updated fixtures that will not only benefit your equine friends but also add value to your business and property.

You can go to www.depreciationbonus.org for AED's Stimulus Package Benefit Calculator. Fill in the cost of the equipment being purchased and what you have available for Section 179 and it will do the rest.

Always consult with your tax advisor to examine your individual situation. This information is offered as educational information only and not intended to be legal or financial advice. For questions specific to your farm business, consult with your tax preparer.