Ag Banks Going Strong
Farm banks are reflecting the bullish attitude in the countryside these days, with more than 99% of these community banks considered "well capitalized"e at the end of 2007. That's the highest capital rating given by federal banking regulators.
The American Bankers Association Center for Agricultural and Rural Banking released its annual Farm Bank Performance report, and it showed a significant amount of the lending in the countryside ($69 billion) is going to small farms.
The ABA report also found that ag loans grew 9% last year and that demand for farm real estate loans was hot. Nearly 48% of all farm loans were made to finance the purchase of farm real estate.
Tax breaks on wheels
If you are going to buy or lease a business vehicle in 2008, you are going to see some type of bigger and better tax break.
- SUVs with loaded weights over 6,000 pounds get big depreciation. The business can expense half the cost; half of the remaining 50% is "bonus depreciation." Add to that regular depreciation, and total first-year write-off can be as much as 80% of total cost.
- Automobile depreciation is higher. First-year depreciation cap on new cars is now $10,960, up from $3,060 in 2007.
- Leasing deals are better. If you lease a car for business in 2008 that's worth more than $18,500, the amount of income the lessee reports is about 25% less than in 2007.
Married business partners have new filing options
If you and your spouse are the sole owners of a business (unincorporated), there is a new filing option to consider that does away with the complicated partnership return and K-1s. Now each spouse can report a share of income and expenses on separate Schedule Cs. To qualify, you must own and operate the business as co-owners, not as an LLC.
Defer income at your own risk
It's a common technique for farmers to defer crop income to the next year. But the stakes this time around are very high. If you defer payment on grain this season, understand you might be accepting a higher degree of risk than in the past. If the holder of the title to the grain has financial problems you could be the big loser.
Volatile times call for caution with suppliers
Not only have prices for agricultural inputs been volatile, but in many cases supplies are projected to be tight. That has some input suppliers looking to lock in 2009 supplies this summer. These suppliers will look for growers to lock in prices for next season, and they will likely request deposits to hold these inputs. Remember that input suppliers are not regulated like grain dealers. So try to find out how financially sound a supplier is before leaving them with a big deposit on next year's inputs.