Numerous federal income tax regulations are scheduled to expire Dec. 31, 2012, unless Congress acts.

Several of these regulations will affect agricultural producers.

“The section 179 expense election is $139,000 for 2012,” says Ron Haugen, North Dakota State University Extension Service farm economist. “However, it is scheduled to revert to $25,000 in 2013. Also, 2012 is the last year for bonus depreciation, which is at 50 percent. It is available for qualifying property placed in service in 2012. These two expiring provisions will greatly impact agricultural producers’ ability to reduce taxable income.”

The 2 percent temporary payroll tax cut also will expire. This affects those who are self-employed and employees.

“Long-term capital gain rates will increase from zero (for those in 10 and 15 percent tax brackets) and 15 percent (for those in higher tax brackets) to 20 percent for all taxpayers,” Haugen says. “In addition, dividends that had this preferential treatment will be taxed at ordinary tax rates.”

Ordinary income tax rates that range from 10 to 35 percent will increase to 15 to 39.6 percent.

Consult with your tax adviser for updates and further information. All of these expiring provisions can be changed by Congress and presidential approval before the end of the year, Haugen says.

NDSU Agriculture Communication – Oct. 29, 2012