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At Growthland, we are committed to keeping you informed about changes that impact agriculture and agribusiness. Recently, Ben Isaacson sat down with Mitch Estling, National Tax Office Leader at Creative Planning, to discuss updates to bonus depreciation and what the new tax law means for buyers and sellers.
Watch the full discussion on YouTube.
What is Bonus Depreciation
Bonus depreciation has been available since 2001, giving businesses the option to immediately write off a portion of asset purchases. Over the years, the percentage has shifted, most recently phasing down from 100 percent.
The new tax law changes that. For assets acquired and placed into service after January 19, 2025, taxpayers can once again take 100 percent bonus depreciation.
This means if you buy a $500,000 tractor after January 19, 2025, (and did not have a binding written contract in place prior to this date) you can expense the entire cost in the same year instead of spreading it out over time.
Why it Matters for Sellers
For those selling equipment or property, the update provides flexibility. If you sell an asset and turn around to buy another piece of equipment or make upgrades such as new grain bins, you can use bonus depreciation to offset taxable gains.
This allows sellers to manage their tax burden more strategically while investing in improvements they may already have been planning.
Why it Matters for Buyers
From a buyer’s perspective, the change is straightforward. Most agricultural assets with a class life of 20 years or less, such as tractors, grain bins, or shops, qualify for bonus depreciation.
In 2025, buyers can elect 40 percent depreciation under the old rules, take the full 100 percent depreciation, or elect out entirely. Starting in 2026, those choices narrow to either 100 percent or none, making planning ahead important.
Pitfalls to Watch Out For
While the change offers opportunities, there are also risks.
Taking too much depreciation too soon may create a net operating loss that only offsets 80 percent of taxable income if carried forward.
Selling assets in future years could mean recapturing depreciation, which changes the overall benefit.
Buying equipment solely for tax purposes may not be the best use of funds if your current assets are still meeting your needs.
As Mitch noted, do not let the tax rules drive your decisions. Tax planning should support your farm or business goals rather than control them.
Key Takeaways
Bonus depreciation returns to 100 percent for assets acquired and placed in service after January 19, 2025.
Both sellers and buyers can use this tool to manage tax burdens in a more flexible way.
Working with your tax advisor is essential to plan ahead and avoid pitfalls.
At Growthland, we help our clients navigate these opportunities with the right knowledge and guidance.
