Farm & Ranch Taxes: 2016 Changes Back »

Written collaboratively by Shannon Sand and Jack Davis.

2016 Tax Updates

Tax rules and regulations change annually, so it is important for producers and tax professionals to stay up to date. For 2016 there have been some changes to the farmers and ranchers tax guide. This article will highlight the majority of updates, for greater depth producers and tax professionals should view IRS Publication 225: Farmer’s Tax Guide.

  • Standard mileage rates.
    Standard mileage rates for operating motor vehicles have changed to 54 cents per mile.
  • Increased section 179 deduction limits.
    There has been an increase to the section 179 expense deduction dollar limits. The maximum amount a person can choose to deduct for most 179 property put into service in 2016 is $500,000 (whereas in 2015 it was $200,000). For additional information see IRS Publication 946: How to Depreciate Property.
  • Special depreciation allowance for specified plants.
    For producers who have plants bearing fruits and nuts there is a special depreciation allowance available.
  • Maximum net earnings.
    The maximum net self-employment earnings subject to the social security part of the self-employment tax is still $118,000. There is no maximum limit on earning subject to the Medicare part of the tax.
  • New filing due dates for 2016 forms E-2, W-3 and 1099-Misc.
    Both paper and electronically filed W-2 and W-3 forms must have been filed with the Social Security administration by January 31st. Both paper and electronic files of 1099-MISC that report non-employee compensation must have been filed with the IRS by January 31st.
  • Social Security and Medicaid tax for 2016.
    For 2016 the social security tax rate is 6.2% each for the employee and employer. The social security base limit is $118,000. The Medicare tax rate is 1.45% for both the employee and employer. There is no wage base limit for Medicare tax.

The Bottom Line

These changes to the tax rules and regulations for 2016 can have some significant impacts on a producer’s ability to plan for the next year and beyond. One of the most significant changes was the 179 deduction expense that allows for producers to deduct up to $500,000 of applicable property when put into service in 2016. Given the changes in the commodity markets in the last couple of years it will be especially important for producers and their accountants to work together and create a tax plan that fits each producers individual needs.

Additional Resources

For more information about tax rules, see the following resources:

Disclaimer: The information in this article is believed to be reliable and correct. However, no guarantee or warranty is provided for its accuracy or completeness. This information is provided exclusively for educational purposes and any action or inaction or decisions made as the result of reading this material is solely the responsibility of readers. The author(s) and South Dakota State University disclaim any responsibility for loss associated with the use of this information.

Image courtesy of Internal Revenue Service

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