For most farmers, the last few years have been profitable. Illinois farmers have seen higher crop prices and higher land prices. And many farmers have put some of their extra cash into upgrading their equipment.
That’s the finding of a study of capital purchases made by farmers enrolled in the Illinois Farm Business Farm Management (FBFM) from 2004 to 2013. The study looked at both capital purchases of buildings and machinery.
For buildings, the top three assets purchased are field tile, grain and feed bins and machine sheds. Tile was 31 percent of the total number of building purchases, while bins and machine sheds were 15 percent and 12 percent, respectively.
For machinery, tractors averaged 12 percent of the total number of machinery purchases from 2004 to 2013.
Over the ten years in the study, December has primarily been the month with the highest number of purchases as well as the highest amount spent on purchases. However, over the last five years, there has been a trend of more purchases (number and amount) in the last quarter of the year, primarily December.
Some of the reasons for this increase are higher farm incomes and increasing of the Section 179 expense election to $500,000 for every year since 2010. The higher expense election has allowed capital purchases to be utilized at the year-end to help farmers optimize their income tax liability.
Farmers may have a reason to keep up that spending — recently, the U.S. House approved permanently extending Section 179 small business deductions at the $500,000 level. The legislation will head to the Senate.
The Illinois Farm Bureau supports the legislation because leaders say the permanent tax extension would provide certainty for farmers and small business and allow economic expansion. However, the White House opposes the bill, arguing the tax break would add $79 billion to the deficit in the next 10 years.
Last December, Congress passed a temporary, retroactive extension that applied to purchases from Jan. 1 to Dec. 31 of last year. The deduction limit dropped back to $25,000 as of Jan. 1.
“We really hope it doesn’t come down to another one-year, eleventh hour retroactive extension of last year’s provisions,” said IFB president Richard Guebert Jr. “That’s just counterproductive. We urge the Senate to take up the House bill and permanently address Section 179 sooner rather than later.”