Many farmers may be looking for tax advantages as we approach the end of 2025, but is a new tractor or equipment purchase the place to find it?
“A lot of farmers justify that, especially at the end of the year, by saying, ‘Oh, I don’t want to pay taxes, so I need to buy some new equipment, and I can depreciate it, and I can save taxes,’” explains Austin Peiffer, Associate Attorney with Ag and Business Legal Strategies in Iowa. “And that’s really putting the cart before the horse.”
Peiffer says making an expensive purchase as a tax haven may not be the best strategy.
“From a business perspective, is this purchase going to make my business better? Is it going to make me more money? Is it going to save me on equipment costs or labor costs or repair costs, or am I just buying it because I want the newest, fanciest tractor?”
So, Peiffer suggests the first step is to make sure it makes good business sense.
“You’ve got money in the bank, and that’s how you want to spend it. More power to you. Most of the clients who end up in here, they’re buying these things on credit, and they’re trying to take a big tax deduction, and they think that all makes sense, but then they’re stuck with big payments for the next who knows how many years, and if it’s not helping you make money, then it’s just drag.”
Reach out to your attorney or tax advisor to discuss the best options for you and your farm.
Source: NAFB News Service
