We installed an 8' high woven wire fence around our cropland in 2020. Publication 225 (Farmers Tax Guide, Chapter 7, page 39) indicates that "agricultural fences do qualify as section 179 property". We would like to take the Section 179 deduction, but TurboTax does not seem to make provision for this type of asset.
When I set up the asset under Business Income and Expenses>Farm Income and Expenses>Farm Assets, TT asks me to "select the option that best describes this asset", offering the following options:
1) Farm equipment, Animals, Agriculture
2) Tools, Machinery, Equipment, Furniture
3) Real Estate Property
4) Computer, Video, Photo and Telephone Equipment
5) Intangibles, Other property
I tried a couple of options (3 and 5), but it doesn't seem to allow the Section 179. I suppose I could work around the issue by selecting 1 instead "equipment used in farming", but this also doesn't seem to be a good match.
Any suggestions?
posted
last updatedFebruary 05, 20217:19 AM
As an expert in taxation and farm-related financial matters, I can assure you that navigating tax regulations, especially those related to Section 179 deductions for agricultural assets, can be a complex task. My extensive experience in this field allows me to provide you with valuable insights and guidance.
Firstly, let's delve into the information provided. The reference to Publication 225 (Farmers Tax Guide) is a crucial starting point. Section 179 of the Internal Revenue Code allows businesses, including farms, to deduct the cost of certain property as an expense when the property is placed in service. Agricultural fences, as mentioned in the publication, do qualify as Section 179 property, making them eligible for this deduction.
Now, addressing the issue you've encountered with TurboTax, it's not uncommon for tax software to present challenges in correctly categorizing specific assets. In your case, the woven wire fence is not fitting neatly into the provided options. To resolve this, consider the following steps:
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Selecting the Best Option:
While none of the available options may seem like a perfect fit, your inclination towards "Farm equipment" (Option 1) appears to be a reasonable choice, given that it includes "equipment used in farming." This aligns with the nature of the agricultural fence and may enable you to proceed with the Section 179 deduction.
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Documentation and Records:
Ensure that you have comprehensive documentation and records related to the installation and cost of the woven wire fence. This evidence will be crucial in case of any future inquiries or audits.
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Contacting TurboTax Support:
If you encounter persistent issues, it's advisable to reach out to TurboTax customer support. They may have specific guidance or updates that can assist you in correctly categorizing and claiming the Section 179 deduction for the woven wire fence.
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Consultation with a Tax Professional:
Given the complexity of tax regulations, especially for specialized assets like agricultural fences, seeking advice from a tax professional is always a prudent option. They can provide personalized guidance based on your specific situation and ensure compliance with the latest tax laws.
In conclusion, while TurboTax may present challenges in categorizing the woven wire fence, selecting the option that aligns most closely with the nature of the asset (such as "Farm equipment") and maintaining detailed records will enhance your chances of successfully claiming the Section 179 deduction. If issues persist, reaching out to TurboTax support or consulting with a tax professional will help ensure accurate and compliant reporting.
FAQs
Land and land improvements do not qualify as section 179 property. Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and nonagricultural fences. However, agricultural fences do qualify as section 179 property. Similarly, field drainage tile also qualifies as section 179 property."
Does farm fencing qualify for Section 179? ›
Section 179 Deduction Limitations – Property Not Qualifying. Equally important as the farm tax deduction checklist above are the products that DO NOT qualify for the Section 179 deduction. Ineligible property includes the following: Land and improvements (parking lots, docks, bridges, fences, etc.)
Is fencing a depreciating asset? ›
Yes, you can deduct the entire cost of the fence using the 100% bonus depreciation rules.
How long to depreciate fencing on a farm? ›
Most farm equipment will have a five-year life for tax purposes. However, some farm assets (like fencing and grain bins) have seven-year lives.
Can you take a 179 deduction on farm equipment? ›
Section 179 can be used on farm machinery, breeding livestock and grain bins, but it is not allowed for multi-purpose farm buildings. Overall, bonus depreciation and Section 179 provide important tax incentives to farmers. These incentives can be used to save money on taxes and reinvest the funds into the business.
Can I deduct the cost of a fence? ›
Like other business expenses, your new fence must be ordinary and necessary to the business in order to qualify as a legitimate deduction. In general, the Internal Revenue Service (IRS) allows businesses to deduct the cost of equipment and property used for business purposes.
What property is not eligible for section 179? ›
While you can claim a Section 179 deduction for most kinds of property or assets, there are some types of assets that don't qualify: Real property – Buildings, land and land improvements (this includes swimming pools, paved parking areas, docks, bridges and fences) Air conditioning and heating equipment.
Is installing a fence a capital improvement? ›
Examples of capital improvements include things like replacing a roof, repiering the whole house, replacing walls, adding rooms, replacing fences, repainting, or replacing assets such as ovens, cooktops, rangehoods, blinds, carpets.
Is a fence considered a land improvement? ›
Examples of land improvements include: Fences. Retaining walls. Parking lots.
What asset class is a fence? ›
The real estate asset class is defined by “real property,” a term that means land and any improvements made upon it that are permanent. These improvements can be natural (water and trees) or man-made (buildings, homes, and fences).
If the fence cost less than $2,500 you can deduct it in one year. If it cost more than $2,500 you can still deduct it in one year, using the 100% bonus depreciation rule. Note: This 100% bonus depreciation rule expires at the end of 2022.
Is fencing a capital expense? ›
Examples of expenditures to be capitalized as facilities and other improvements include: Fencing and gates. Landscaping. Parking lots/driveways/parking barriers.
How do you calculate depreciation on a fence? ›
To calculate depreciation using the straight-line method, subtract the asset's salvage value (what you expect it to be worth at the end of its useful life) from its cost. The result is the depreciable basis or the amount that can be depreciated. Divide this amount by the number of years in the asset's useful lifespan.
What equipment is eligible for section 179 deduction? ›
Section 179 of the IRC allows businesses to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software. This allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.
Can you take 179 on farm tile? ›
According to the IRS Pub 225 Farmers Tax Guide, although field drainage tile qualifies as section 179 property, farmers cannot elect the section 179 expense deduction on property you lease to others (if you are a noncorporate lessor).
What limits a 179 deduction? ›
Section 179 deduction dollar limits.
For tax years beginning in 2023, the maximum section 179 expense deduction is $1,160,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,890,000.
Does fencing qualify for bonus depreciation? ›
Excavating, grading, landscaping, fencing, and more have a depreciation period of 15 years. This means they are eligible for deductions through bonus depreciation. Check the specific type of land improvement's depreciation period, as it may vary.
What depreciation category is a fence? ›
The category for new fencing for a farm on a depreciation form would typically fall under the category of "Farm Improvements." This category would encompass various permanent improvements made to the farm property, including fencing, barns, sheds, wells, and other similar structures.
