1. Equipment & Asset Purchases
Goal: Maximize Section 179 and Bonus Depreciation benefits.
✅ Before Purchase
- Forecast taxable income for the year to determine how much expense you can absorb without creating unnecessary losses.
- Identify qualifying assets with ≤ 20-year recovery period (e.g., tractors, combines, grain bins, breeding livestock, irrigation systems, fencing).
- Confirm whether you should use Section 179 (cap: $2.5M, phase-out: $4M) or Bonus Depreciation (100% first year).
- Sequence purchases so you preserve flexibility for future years.
✅ At Purchase
- Keep invoices and proof of service date (must be placed in service before year-end).
- For shared-use or dual-purpose property, document business use percentage.
✅ Year-End
- Reconcile asset list to ensure correct categorization—avoid misclassifying real estate as qualifying property.
2. AGI Threshold Monitoring
Goal: Maintain eligibility for USDA conservation, disaster, and cost-share programs.
✅ Quarterly
- Track income streams separately:
- Ag-derived income: crop/livestock sales, breeding fees, grazing leases, custom harvesting, ag event proceeds.
- Non-Ag income: investments, rental properties, unrelated business income.
- Run a rolling 3-year average AGI calculation to check if ≥ 75% is from agriculture.
✅ Year-End
- Adjust income timing if close to the threshold (e.g., defer non-ag income or accelerate ag-related sales).
- Ensure accountant uses IRS-recognized categories for “agriculture income” to avoid disqualification.
3. Land Sale Planning
Goal: Minimize capital gains via installment sales where applicable.
✅ Before Listing
- Confirm land has been in agricultural use for at least 10 years.
- If selling to a qualified farmer, negotiate a 10-year ag-use covenant to qualify for installment reporting.
✅ During Sale Negotiations
- Structure deal to spread capital gain over four equal annual installments.
- Assess impact on brackets, "NIIT" (Net Investment Income Tax) exposure, and self-employment taxes.
✅ Post-Sale
- Document use covenant and retain for 10+ years for IRS substantiation.
4. Estate & Succession Planning
Goal: Use $15M/$30M estate tax exemption to protect the operation.
✅ Annually
- Update balance sheet to reflect current asset values—land, livestock, equipment, water rights.
- Consider gifting ownership interests to next generation to lock in current high exemptions.
- Review entity structures for valuation discounts and protection.
✅ Every 3–5 Years
- Evaluate conservation easements for both tax benefit and operational fit.
5. Financing & Loan Terms
Goal: Leverage the 25% lender interest exclusion indirectly.
✅ When Renewing or Seeking Loans
- Solicit multiple offers from banks, Farm Credit, and Ag lenders — use OBBB’s incentive to negotiate rates and terms.
- Target fixed-rate financing for big-ticket equipment or expansion projects while rates are favorable.
6. Rodeo & Specialty Ag Operations
Goal: Align equipment, property, and AGI strategies for mixed-activity businesses.
✅ Asset Purchases
- Deduct trailers, livestock, transport rigs, arenas, and specialized gear if business-use-qualified.
✅ Income Tracking
- If rodeo operations are majority of your income, track any related livestock or breeding revenue separately to boost ag percentage for AGI thresholds.
Pro Tip:
Schedule an annual “OBBB Review” in November or early December—this ensures time to make year-end purchases, shift income, or update estate documents while options are still open.
Author: Mike DiSabatino is an Accountant, Tax Strategist, and CFO with 35 years of experience helping businesses and taxpayers across the country protect assets, minimize taxes, and drive growth. A former CPA and corporate CFO, Mike honed his instincts for quick thinking and precise execution on the racetrack—skills he now applies to crafting winning financial strategies. His track record blends high-speed decision-making with deep technical expertise, delivering results that keep his clients ahead in today’s fast-changing economic environment.