*** Important Update for the 2012 Tax Year ***
Jan 4, 2012
Important tax planning
implications updated for the
2012 tax year will be posted to
this site soon.
Both the 'Tax
Relief Act of 2010' as well as
the 'Jobs Act of 2010' that
passed in late 2010 affected
Section 179 in a positive way
for this 2012 tax year.
Following are the highlights for
the 2012 tax year:
The 2012 Section 179
Deduction limit after adjustment
for inflation has increased to
$139,000 (maximum allowance
would have been only $25,000
prior to the new legislation).
The 2012 Section 179
Deduction threshold for total
amount of equipment that can be
purchased has increased to
$560,000 (threshold would have
been only $200,000 prior to the
The Section 179 Deduction is
available for most new and used
capital equipment, and also
includes certain software.
The new law allows 50% “Bonus
Depreciation” on qualified
assets placed in service during
2012. However, this can be taken
on new equipment only.
When applying these
provisions, Section 179 is
generally taken first, followed
by Bonus Depreciation – unless
the business has no taxable
profit in 2012.
Also, many businesses found
Section 179 Qualified Financing to
be an attractive option last
(Information taken from
Please refer to IRS Publication 225, “Farmer Tax guide” for more information. It can be attained at the IRS website http://www.irs.gov
Your accountant can advise you of your tax structure and we recommend that you follow that advice.
These are just a few of the exciting tax advantages of alpaca ownership!
The Tax Benefits
How would you like to trim your tax liability? Alpacas,
as well as other types of livestock, are the answer.
Alpacas are by far, the easiest to manage ..... ask any large animal Vet
who has worked with alpacas!!
You can choose to enhance your real estate, purchase animals, and deduct expenses directly against earned income. If you prefer to agist or board the animals, you can capture the expenses and cost of the animals against passive income now and 15 years into the future. Tax deferred wealth building is another benefit. Taxes are postponed on the increased value until you are ready to start selling the offspring.
Many alpaca breeders throughout the United States have
recognized financial and personal gains. The rewards are many. Their
initial investment has grown to a level that creates independence. Individuals have recognized that their current careers can be incorporated into alpaca breeding with positive results. Take for example the
physician who has done extensive research into the Accoyo line of alpacas. He has been winning in the show rings and his progeny line is sought after before they are even born! As an added bonus, many of these same individuals will share their stories of how they begun and grew into today’s levels. The alpaca industry is full of many individuals willing to help you get started!
Raising Alpacas on Your Own Property
First you must establish that you are actively involved in the business and desire to make a profit. Alpaca ownership suggests you:
- Operate the farm in a business like manner
- Depend to some degree on income from your farm
- Calculate that losses are circumstantial and are beyond your control or are normal in the start up phase.
- Change your operations to increase profits
- Conduct operation as a business, not a hobby
Even if you are a passive investor you will still be allowed the following tax benefits. The only question remains as to whether you can take the deductions on a current basis.
- Vehicle mileage for all ranch business
- Fees for income tax return
- Livestock feed
- Labor hired to run the ranch
- Breeding Fees
- Taxes and insurance
- Depreciation on animals
- Depreciation of real property such as barns and equipment
- Farm travel expenses
- Educational expenses
- Veterinarian care
- Boarding fees
- Farm fuel and oil
- Attorney fees
Also refer to Section 179 from the IRS that allows a substantial deduction each year for expenses.
Please note that once you have determined either a net income or loss, that amount is included on the tax return. It is either an addition to or a deduction from ordinary income. Losses can be carried back for 3 years and forward for 15 years. To deduct any loss, you must be at risk for an amount equal to or exceeding the losses claimed. The “Risk Factor” is
- The amount of money you contribute
- The amount of money you borrowed
The passive owner’s losses that are in excess of current income can be carried forward and taken against future income. Timing is the issue.
Alpacas in which you have cost basis can now be
depreciated 50% or 100% for new stock!!!!
Straight line or accelerated schedules allow for a percentage of the
asset to be written off. Example: An alpaca is purchased for $20,000,
depreciated 50% of its value and then resold for $20,000. There would be a gain for tax purposes of $10,000. Result = The adjusted cost basis is deducted from your sale price to determine gain or loss.
Capital Gain Treatment: The sale of breeding stock
qualifies for capital gains treatment. Please note that alpaca offspring
do not qualify for capital gain but rather income taxes.