Used farm equipment asset class - TurboTax says 5 year

Forum|Forum|5 years ago
February 28, 2021
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I am entering my used farm equipment purchases (tractor, implements) for depreciation, and everything I've found online indicates they should be 7-year property. However, when I enter them in TurboTax, it puts them in as 5-year property. If I go back through the Edit button to review the information, the "I purchased this asset new" box is checked, even though I selected "None of the above" when I entered the asset. If I deselect the "I purchased this asset new" box and continue, it still keeps it at 5-year depreciation and the box is again checked when I go back through to review. Can anyone explain this? Isn't used farm equipment (such as a tractor implement) supposed to be 7-year depreciation? I have a screen capture video of this occurring during the asset entry, and I'm concerned that my previous years' taxes may have been incorrect due to this issue. I first noticed it on 2019, but I think it's the same for previous years, as well.

TurboTax Home & Biz Windows

ColeenD3

Per PUB 225, a new tractor (new farm machinery and equipment) has a useful life under GDs of 5 years. This changed with TCJA. A used tractor still has a life of seven years.

[Edited 3/9/21|1:18 PM EST]

farmgal2021Author

Colleen,

Thanks for replying, but I'm specifically asking about USED farm equipment and machinery (specifically an implement which attaches to a tractor). To clarify, it was purchased from someone else, and is several years old. Here's what I've found:

Per https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act

Changes to treatment of certain farm property

The new law shortens the recovery period for machinery and equipment used in a farming business from seven to five years. This shorter recovery period, however, doesn’t apply to grain bins, cotton ginning assets, fences or other land improvements. The original use of the property must occur after Dec. 31, 2017. This recovery period is effective for eligible property placed in service after Dec. 31, 2017.

Per Pub 946: https://www.irs.gov/publications/p946#en_US_2019_publink[phone number removed]

5-year property...

h. Any machinery equipment (other than any grain bin, cotton ginning asset, fence, or other land improvement) used in a farming business and placed in service after 2017, in tax years ending after 2017. The original use of the property must begin with you after 2017.

7-year property...

b. Used agricultural machinery and equipment placed in service after 2017, grain bins, cotton ginning assets, or fences used in a farming business (but no other land improvements).

AmyC

The equipment while new to you, is used and would be 7 years. This begins your use of the tractor. You deserve to get your money out of it. You are depreciating the tractor over a 7 year period based on what you paid. If the tractor does not last that long, you would do a disposal to claim the rest of the money. If the tractor lasts longer than 7 years, you got your money out of it.

The tools could be supplies or may need to be depreciated, depending on the cost. Invoices/ costs under $2,500 can fall under de minimis rules and be written off, not subject to depreciation. See Tangible Property Final Regulations | Internal Revenue Service & Reform Changes

[Edited 3/9/2021 | 11:43 am PST]

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