Could 100% Bonus Depreciation Make a Return Under a Trump 2.0 Administration?

One of the biggest anticipated changes that could impact farms across the U.S. is the possible change to the tax policy under a second Trump administration.

President-elect Donald Trump is preparing for his second term as President. While it’s not two consecutive terms, his history during the first term could serve as a possible playbook on how the next four years could impact agriculture.

“You have to remember, Trump is a populist,” says Jim Wiesemeyer, Farm Journal Washington correspondent. “He learned a lot from his first four years. So, he’s better prepared now. He won’t choose a lot of cabinet people who will eventually write books negative about him. He learned that lesson.”

The parlor game of whom will be named to key cabinet positions, including the U.S. Secretary of Agriculture, will continue during the next few months. One of the biggest anticipated changes that could impact farms across the U.S. is the possible change to the tax policy.

“You can up the odds that you’re going to have many, if not most, of the expiring Trump 2017 tax cuts that expire at the end of 2025 renewed. That’s good for the U.S. sector because the estate tax exemptions will probably remain as they currently are,” says Wiesemeyer.

While anticipated changes continue to be weighed by political analysts, one agricultural tax expert thinks farmers can count on one major thing. “I think we’re definitely going to see no tax increases. That’s for sure,” says Paul Neiffer, Farm CPA and contributor to AgWeb.

Neiffer says even though Trump campaigned on no tax on tips and no taxes on social security, Neiffer doesn’t see those proposals passing, as it would leave too big of a hole in the federal budget deficit.

“But certainly, the lifetime exemption that next year will be almost $14 million, I think that’s going to be made permanent. And that’s great news for our farmers who possibly are facing some estate taxes,” Neiffer says.

Neiffer also thinks the Section 2032A deduction, which permits an alternative method for valuing certain real property used either as a farm for a farming purpose or in a trade or business other than farming, is something that could get bumped up to $14 million per taxpayer. He believes it would be a “good deal” for farmers.

The other benefit, according to Neiffer, is the extension of the Section 199A Deduction and additional changes he expects to occur with the corporate tax rate.

“The lower rates for 199A capital will likely to be extended,” Neiffer says. “We could even see a reduction in the corporate tax rate down to maybe 15% for farmers. And if that happens, you could see a lot of farmers switching from being an individual farmer to being a corporate farmer.”

According to Neiffer, 100% bonus depreciation could also make a comeback under Trump.

“We think, perhaps, 100% bonus depreciation might be coming back for farmers,” says Neiffer. “When they buy equipment or buildings, farm buildings, etc., they’ll be able to deduct 100% of that in the year of purchase.”

Neiffer points out farmers need to be careful and make sure they optimize their depreciation related to their debt, but the idea of 100% bonus depreciation would be a welcome change for farmers.

Also, Wiesemeyer says the relief for farmers is there will be no major changes to capital gains taxes, which is something the democratic nominee Kamala Harris had proposed during her campaign.

EDITOR’S TAKE:

The commentators in this article are long-time Washington insiders and know all the major players and how the legislative process works. Based on their observations and analysis, a Trump tax policy should be very favorable to farmers/ranchers. Most of the policies could significantly reduce taxes for most farming operations. Especially when it has to do with estate taxes and depreciation. We have been suggesting that you encourage farmers/ranchers to take advantage of declining depreciation schedules right now. Can you imagine how helpful it would be to see the allowable deduction go back to 100%! That would benefit the farmers/ranchers and your dealership big time.