Farming has always been a challenging and demanding profession, requiring hard work, patience and resilience. However, in recent years, farmers have faced an even greater hurdle – rising overhead costs. From equipment and labor to seed, feed and land, the expenses of running a farm have been edging up, tightening margins and pushing growers to find new ways to produce more with less.
Case in point: Higher input costs were identified as the top concern for 44% of US farmers last year. Input costs have been steadily increasing over the years, making it more expensive for farmers to obtain the necessary resources to run their operations. Increases in prices of natural gas and coal, which are key feedstocks and energy sources in fertilizer production, added upward pressure on fertilizer prices, which skyrocketed by more than 60% from 2021 to 2022.
Meanwhile, the price of buying and renting farmland is on the rise. For example, the value of an average farm acre in Iowa increased by 22.4% to $9,400. Nationwide, farmland values increased by 12.4%and reached $3,800 an acre, the highest on record since 1970.
As the demand for agricultural products increases, so does the demand for labor. However, finding and retaining skilled workers in the agricultural industry is becoming increasingly difficult. This can result in higher wages and increased expenses for farmers.
Modern farming often requires specialized machinery, such as tractors, harvesters and irrigation systems. These machines come with a hefty price tag and require regular maintenance and repairs, further adding to the financial burden on farmers.
In short, US farmers saw farm production expenses jump 4% in 2023, on the heels of a steady upward trend in recent years. This is why tax incentive programs by the US Internal Revenue Service (IRS) are offering some relief to farmers who want to invest in improvements, without taking a huge hit.
Understanding Section 179
The US IRS Section 179 program offers a range of benefits that can significantly impact the success and profitability of farming businesses. Simply put, the Section 179 program allows farmers to deduct the full cost of qualifying equipment and property purchases in the same year. This means that instead of waiting for years to receive tax refunds, farmers can claim the entire deduction upfront, providing an immediate boost to their bottom line. By taking advantage of this deduction, they can reinvest the saved money into your business, enabling farmers to upgrade their equipment, purchase new machinery or make necessary property improvements.
Section 179 also helps farmers increase their overall efficiency and productivity. With the ability to deduct the cost of new equipment, they can invest in cutting-edge technology that streamlines their farming processes and enhances productivity. From advanced irrigation systems to precision agriculture tools, Section 179 empowers farmers with additional financial opportunities to help make it more affordable to adopt innovative solutions that can revolutionize farming practices.
Jay Hagen works with First Western Equipment Finance and facilitates finance programs across the United States. He says the program is flexible for farmers, regardless of how they’re acquiring new capital equipment or software. “Think of how new equipment can improve productivity. So can these financial programs – the savings can be just as significant,” says Hagen, who notes that farmers should always check with their accountant or tax advisor before making a decision. “When you’re considering investing in capital equipment, you’re going to get a tax break based on your tax bracket. It’s really a win-win.” He adds that the program applies to equipment whether purchased outright or financed.
Find out more about how you can leverage Section 179 to improve your farm’s bottom line using First Western Equipment Finance’s Section 179 savings calculator – download now.
