COLUMBUS – The state executive director for Ohio’s Farm Service Agency, Larry Adams, reminds producers that on March 9, President George W. Bush signed into law the Job Creation and Worker Assistance Act of 2002.
The act provides tax relief to individuals and businesses along with extended unemployment benefits for individuals.
The best part. The most significant provision for farmers is the 30-percent additional first-year depreciation allowance described in the following paragraph.
Under current law, farmers and other small businesses can immediately deduct up to $24,000 of the cost of an investment in qualifying machinery and equipment. This amount is scheduled to increase to $25,000 by 2003.
The remaining amount is depreciated under the Modified Accelerated Cost Recovery System. In addition to the existing expensing provision, the act provides an additional first-year depreciation deduction equal to 30 percent of qualifying property for investments after Sept. 10, 2001 and before Sept. 11, 2004.
Qualifying property. Most depreciable farm property would be considered qualifying property, including farm machinery and equipment, crop storage facilities and single purpose agricultural and horticultural structures.
Under current law, 83 percent of farmers who make capital investments can already expense their entire purchase. Thus, about 200,000 farmers each year invest more than $24,000 and would benefit from the first-year depreciation provision.
Retroactive to 2001. Since the provision is retroactive to 2001, these farmers can immediately benefit from the change on their 2001 returns although in some instances this may require an amended return.
For 2002, the amount of farm capital investment that could be written off is estimated to increase by about 15 percent, or $1.8 billion as a result of this provision. This should reduce federal income and self-employment taxes paid by over $500 million.
Annual tax savings in 2003 and 2004 are expected to be only slightly smaller at just under $500 million per year.
