2009 Tax Law Changes

By Suzy Martin & Rush Midkiff, KFBM

There have been some recent changes to tax law that could impact you and the amount of tax that you will owe for 2009. The following is a brief description of some of the changes that will have the greatest impact for some KFBM producers.

Five Year Recovery Period for New Farm Machinery:
The Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (TEAMTRA) requires a shorter recovery period for certain qualified items. Farm machinery and equipment has a 5-year MACRS recovery period if it meets three requirements. One, its original use starts with the taxpayer after December 31, 2008. Two, it is placed in service before January 1, 2010. Three, it is not a grain bin, fence or other land improvement, or cotton-ginning asset. Taxpayers cannot elect to use the 7-year recovery period for machinery and equipment that qualifies for the 5-year recovery period. They can, however, elect to use the straight-line method over the 5-year GDS recovery period or straight-line method over the 10-year ADS recovery period.

Other Depreciation Topics for 2009:
The 50% Bonus Depreciation for qualified items continues through December 31, 2009. The qualified property must be new and have a useful life of 20 years or less.

Section 179 Expensing also remains the same. The maximum amount a taxpayer may deduct is $250,000. The limit is reduced dollar for dollar if the cost of qualifying property during the year exceeds $800,000.

Tax Credits for Energy Efficiency:
The tax credit for making your existing home more energy efficient has been expanded. The credit is available for 30% of the cost up to $1,500 for qualified items placed in service from January 1, 2009 through December 31, 2010. Qualified items include windows, doors, roofing, insulation, HVAC, water heaters and biomass stoves. There is also a credit available at 30% of the cost with no upper limit for certain qualified items placed in service through 2016. These qualified items include geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells. As in prior years, the improvements must be for the taxpayer’s principal residence. For more information on the qualified items go to http://www.energystar.gov/index.cfm?c=tax_credits.tx_index.