Farm Vehicle Tax Deductions

by Gregory Hamel ; Updated June 08, 2018

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 including expenses related to purchasing and using vehicles for farm use.

Depreciation Expense

The Internal Revenue Service (IRS) allows farmers to deduct the depreciated cost of farm equipment. Depreciation is the loss of value over time due to such factors as aging and wear and tear. Taxpayers can't deduct the full amount in the same year they bought the asset; instead they take the deduction over several years. 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 specialty vehicles used for farm purposes is based on the full value of the vehicle.

However, the IRS places limits on certain types of vehicles, such as passenger vehicles used primarily to transport people on roads and highways. According to the IRS, the maximum depreciation deduction 2012-2017 is $11,160.00 for the first year, $5,100.00 for the second year, $3,050.00 for the third year and $1,875.00 for the fourth year and beyond.

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 driven during the year multiplied by a standard mileage rate. The standard mileage rate for 2017 is 53.5 cents (0.535) per mile.

Personal Use Vehicles

If you use a farm vehicle to produce 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 mileage can be attributed to business purposes, you can only take a deduction of $1,250.00.

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 expense. The cost of capital expenses must be deducted over several years by taking deductions by depreciation.

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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.

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