Farm Vehicle Tax Deductions

by Gregory Hamel ; Updated July 27, 2017

Businesses in the U.S. are subject to a variety of tax rules, some of which allow businesses to take tax credits and deductions for various expenses that they incur during operation. Farm businesses are granted many tax deductions for common expenses included expenses related to purchasing and using vehicles for farm purposes.

Depreciation Expense

The Internal Revenue Service allows farmers to deduct the cost associated the depreciation of various farm equipment from taxes. Depreciation is the loss of value over time due to such factors as aging and wear and tear. The IRS states that tangible property including buildings, machinery, equipment and vehicles used by farmers to produce income is eligible for a tax deduction based on depreciation. The depreciation deduction for vehicles like tractors and other special vehicles used for farm purposes is based on the full value of the vehicle. However, the IRS places limits on types of vehicles such as passenger vehicles used primarily to transport people on roads and highways like normal cars. The IRS says that for passenger cars placed in service in 2010, the maximum deprecation deduction for the first year is $11,060, the maximum deduction for the second year is $4,900 and the maximum deduction for the fourth year is $2,950.

Other Truck and Car Expenses

Other costs associated with operating cars and trucks for farm purposes are tax deductible. The IRS states that common costs of vehicle operation that are deductible include gasoline, oil, repairs, license tags and insurance. The amount of the deduction you take can either be equivalent to the actual expenses incurred by operating vehicles or the total mileage put on vehicles multiplied by a standard mileage rate. The standard mileage rate was 50 cents per mile as of the time of publication.

Personal Use Vehicles

If you use a farm vehicle to produce farm income and for personal purposes the tax deduction is limited to the expenses incurred while operating it for business purposes. For instance, if you incur $5,000 of expenses operating a car but only 25 percent of the millage can be attributed to business uses, you can only take a deduction of $1,250.

Repairs and Maintenance

The cost of repairing and maintaining farm equipment including the periodic or routine maintenance of trucks, tractors, and other farm machinery is tax deductible. If a repair or overhaul increases the value of property, it may, however, be considered a capital expenses. The cost of capital expenses must be deducted over several years by taking deductions for depreciation.

About the Author

Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.