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.

Pull ahead and accelerate your business growth!

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Pull ahead and accelerate your business growth!

The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!

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In our earlier overview, we covered the major provisions of the OBBB Act that matter to agriculture. Now, let’s focus on practical applications—ways to align your purchases, sales, and income with the new law to optimize cash flow, preserve eligibility for programs, and reduce long-term tax exposure.

1. Combining Section 179 and Bonus Depreciation

Scenario:
You run a mixed cattle and crop operation. In 2026, you purchase:

• A new hay baler – $145,000
• Fencing upgrades – $80,000
• A new grain bin – $210,000
• A breeding herd expansion – $250,000

Strategy under OBBB:

• Use Section 179 for the baler, fencing, and grain bin.
• Apply bonus depreciation for the breeding livestock and any remaining capital assets.
• Because bonus depreciation covers property with a 20-year or shorter recovery period, the grain bin also qualifies, but using Section 179 strategically preserves bonus depreciation flexibility for later purchases.

Benefit: Potentially write off the full $685,000 in Year 1, reducing taxable income significantly, freeing cash for operations or debt reduction.

2. Navigating the AGI Threshold Exemption

Many high-revenue farms and ranches are excluded from USDA programs because of the $900,000 AGI cap. The OBBB Act’s 75% rule changes that.

Example:

• AGI: $1.4M
• Ag-derived income: $1.1M (79%)
• Other income: $300K (21%)

Old Rules: No eligibility for certain disaster, conservation, or cost-share payments.
New Rules: Qualifies because ≥ 75% of AGI is from farming/ranching.

Action Item: Track and document income sources meticulously—grain/livestock sales, custom grazing, breeding services, etc. Misclassification could cost eligibility.

3. Installment Sale of Farmland

If you’re selling to a qualified farmer, spreading capital gains over four years can smooth income and manage tax brackets.

Example:

• Sale price: $4M
• Basis: $1.2M
• Gain: $2.8M

Lump-Sum Tax Impact: May push you into top capital gains bracket and phase out other benefits in one year.
Installment Method: Recognize $700K of gain each year over four years, keeping you in lower brackets and avoiding spikes in self-employment or NIIT exposure.

Key Point: Requires 10-year Ag-use history and 10-year Ag-use covenant with the buyer—this is non-negotiable.

4. Anticipating the Indirect Impact of Ag Loan Interest Exclusions

While the 25% interest income exclusion applies to lenders, not producers, the competitive lending market may push institutions to pass along savings via:

• Slightly reduced rates
• More flexible terms (e.g., longer fixed-rate periods)
• Higher loan-to-value limits for equipment or livestock loans

Action: Shop lenders aggressively—OBBB may make terms negotiable in your favor.

5. Estate Planning Alignment

With exemptions at $15M/$30M, your operation may now be fully shielded from estate tax—but only if assets are valued correctly and titled strategically.

• Use current high exemptions to gift ownership interests now.
• Revisit entity structures (LLCs, partnerships) to lock in valuation discounts.
• Consider integrating conservation easements where they align with land use and succession plans.

6. Rodeo & Specialty Ag Operations

Even if you’re primarily in rodeo or performance livestock, OBBB’s provisions apply if you:

• Own your own rigs, stock, or transport equipment (deductible under 179/bonus)
• Earn the majority of AGI from livestock, breeding, or event operations
• Invest in specialized facilities (practice arenas, breeding barns) with qualifying property status

CFO Bottom Line:

The OBBB Act isn’t just a tax bill—it’s a strategic toolkit. The largest gains will go to those who:

• Time purchases to leverage immediate expensing.
• Classify income accurately to meet AGI thresholds.
• Structure sales and transfers for long-term tax minimization.
• Integrate financing and estate planning with the new rules.

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.

Pull ahead and accelerate your business growth!

The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!

Schedule Your Free Consultation

Pull ahead and accelerate your business growth!

The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!

(855) 922-9336 | This email address is being protected from spambots. You need JavaScript enabled to view it.

The One Big Beautiful Bill (OBBB Act), signed into law on July 4, 2025, contains some of the most significant tax and agricultural provisions we’ve seen in years. Here’s a breakdown of the key points, with a focus on what they mean in practical terms for ranchers, farmers, and rodeo professionals.

1. Estate & Gift Tax Exemption — Protecting the Family Operation

The Act permanently increases the estate-and-gift tax exemption to $15 million per individual or $30 million per married couple (indexed for inflation beginning 2026).
For agricultural families, this means a much greater likelihood that the ranch, farmland, livestock, and operational assets can pass to the next generation without triggering a tax bill so large it forces liquidation. Careful estate planning will still be critical, but the higher thresholds offer meaningful breathing room.

2. Equipment & Asset Write-Offs — Section 179 and Bonus Depreciation

• Section 179: Deduct up to $2.5 million in qualified equipment in the year it’s placed in service, with a phase-out starting at $4 million (both indexed for inflation). This applies to tangible personal property used in your trade—tractors, combines, fencing, breeding equipment, corrals, irrigation systems, and most portable Ag structures.
• Bonus Depreciation: Permanently reinstates 100% first-year depreciation for “qualified property” placed in service after January 19, 2025.
  Here, “property” means tangible assets with a recovery period of 20 years or less under IRS rules—not real estate or bare land. This can include:
  • Grain bins, silos, and feed storage structures
  • Water wells
  • Certain land improvements like drainage tile or leveled fields
  • Livestock purchased for breeding
  • Single-purpose Ag buildings (e.g., milking parlors, farrowing barns)

The goal is to encourage capital investment in the productive side of your operation—not buildings used for residential purposes.

3. Agricultural-Specific Tax Provisions

• Interest on Ag Loans: The law allows lenders—such as banks, Farm Credit institutions, or certain insurance companies—to exclude 25% of the interest income they earn from qualifying Ag loans from their own taxable income.
  This does not generally apply to one farmer loaning money to another—it’s targeted at institutional lending. The intended benefit is indirect: lenders may pass on savings in the form of lower interest rates or more favorable terms for farm and ranch borrowers.
• Installment Treatment for Farmland Sales: If you sell farmland to a qualified farmer (defined as someone who has farmed for at least 3 years), you may spread capital gains taxes over four equal annual installments, provided:
  • The land has been in farm use or leased for farm use for at least 10 years before the sale.
  • The buyer commits to using it for agricultural purposes for the next 10 years.
• AGI Threshold Exemption for USDA Programs: Many USDA conservation, disaster relief, and cost-share programs have an income eligibility cap—often $900,000 adjusted gross income.
  Under the OBBB Act, if at least 75% of your average AGI over the prior 3 years comes from farming, ranching, or forestry, this cap is waived.
  For example:

• A farmer with $1.2M AGI—$950K from crop and livestock sales, $250K from other sources—would normally be ineligible.
• Because 79% of their AGI is from Ag activities, they now qualify for these payments and benefits.

4. Broader Federal Tax Provisions

• 2017 Tax Rate Structure: Permanently extends current brackets and rates.
• Standard Deduction & Credits: Increases the standard deduction and enhances child tax credits through 2028.
• SALT Deduction: Raises the cap to $40,000 through 2029.
• Program Funding Changes: Cuts to Medicaid, SNAP, and certain energy programs may affect rural health access and community services.

CFO Perspective

• These changes open opportunities to upgrade equipment, expand infrastructure, and transfer operations to the next generation more efficiently.
• The AGI exemption expansion alone could make or break eligibility for disaster aid or conservation programs in high-income years.
• While direct lending exclusions won’t apply to most producers, they could still improve financing conditions.
• As always, precise planning is key—many of these benefits hinge on how income is classified and how purchases are structured.

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.

Pull ahead and accelerate your business growth!

The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!

Schedule Your Free Consultation

Pull ahead and accelerate your business growth!

The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!

(855) 922-9336 | This email address is being protected from spambots. You need JavaScript enabled to view it.