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Paying some tax now can lower taxes during transition

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Many farmers commonly buy equipment at the end of the year to lower their tax liability, but for someone who is considering a farm transition soon, that might not be a good idea.

Mark Schmitz is a farm transition planner with Wisconsin’s Farm Center.  He tells Brownfield farmers should talk to their tax professionals before buying equipment if they will be retiring and either selling or passing the farm down soon. “All of a sudden when it comes time to sell that piece of equipment, you might have what the IRS would call depreciation recapture, which would trigger a big ordinary income tax liability, so that’s something to keep in mind.”

Schmitz tells Brownfield it’s not always bad to pay some taxes prior to retiring.

Paying some tax now can lower taxes during transition