Planning ahead for tax time may make the best financial sense

There are some new tax issues and resources for 2010 and 2011.

Expenses increase. Tax Benefit – Section 179 Expensing Increased from $250,000 to $500,000 for 2010 and 2011.

The recently passed “Small Business Jobs Act of 2010” signed into law Sept. 27 allows for opportunity for sizable tax write-off for farmers in 2010 and 2011.

In an effort to further jump-start the economy, this act raises the threshold on “Section 179 Expensing” from the current limit of $250,000 to $500,000 for tax years 2010 and 2011. The terms apply to new and used equipment.

Previous law phased out the deductions as eligible purchases exceeded $800,000. The new ceiling for this phase-out has been raised to $2 million.

The new act also revived the 50 percent bonus depreciation for qualified property placed in service in 2010. These measures are meant to be an incentive for taxpayers to buy equipment.

Further information can be found at: www.calt.iastate.edu/taxbill.html or www.sba.gov/jobsact.

Healthcare

Small business health care tax credit – Farm Business Benefit.

The new health reform law gives a tax credit to certain small employers (including farm business owners with employees) that provide health care coverage to their employees, effective with tax years beginning in 2010.

Small employers that provide health care coverage to their employees and that meet certain requirements (“qualified employers”) generally are eligible for a federal income tax credit for health insurance premiums they pay for certain employees.

In order to be a qualified employer:

1) the employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, and

2) the average annual wages of its employees for the year must be less than $50,000 per FTE, and

3) the employer must pay the premiums under a “qualifying arrangement.”

The IRS has an informative website that answers the many different questions about this new provision of the Patient Protection and Affordable Care Act, which was passed by Congress and was signed by President Obama March 23, 2010.

The following website contains questions and answers that provide information on the credit as it applies for 2010-2013, including information on transition relief for 2010: www.irs.gov/newsroom/article/0,,id=220839,00.html

Rural Tax Education Website

This new website provides farmers and ranchers, other agricultural producers and Extension educators with a source for agriculturally related income and self-employment tax information that is both current and easy to understand. This website includes many short easy-to-understand fact sheets addressing issues critical to farmers.

Topics include: Like Kind Exchange of Business Assets, Sale of Business Property, Form 1099 Information Returns, Farm Losses versus Hobby Losses, Filing Dates and Estimated Tax Payments, Weather Related Sales of Livestock, and more. This website also includes a sample farm tax return. The link to this informative website is: http://www.ruraltax.org.

National Timber Tax Website

Very few sections of the Internal Revenue Code are written specifically for timber. This means there is a considerable amount of interpretation involved.

This website was developed to be used by timberland owners, as well as a reference source for accountants, attorneys, consulting foresters and other professionals who work with timberland owners by answering specific questions regarding the tax treatment of timber related activities. http://www.timbertax.org.

About the Author

(Barry Ward is the leader of production business management in the Ohio State University Extension’s department of agricultural, environmental and development economics.) More Stories by Barry Ward

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