Are your taxes too high? Maybe you should consider raising alpacas. I'm not sure what they are but the goverment wants you to raise a couple.
Alpaca Taxes 2003:
Why Not Have Uncle Sam Help You Buy Your Alpacas
By Mike Safley
Raising alpacas can offer the farmer some very attractive tax advantages. In 2003 those benefits got a lot better due to the "Jobs and Growth Reconciliation Tax Act." which was enacted into law on May 28, 2003. The new rules have added several powerful incentives for people who buy alpacas. They are: 1) The 179 deduction has been raised from $25,000 to $100,000, and 2) The bill raised the 30% bonus depreciation to 50% in the first year of purchase. These benefits are for assets placed in service after May 5, 2003 and they expire in December 2004.
If alpacas are raised for profit, all the expenses attributable to the endeavor can be written off against your income. Expenses would include not only feed, fertilizer, veterinarian care, etc., but depreciation of such tangible property as breeding stock, barns and fences, all of which can help shelter current cash flow from tax. Beyond these basics there are several strategic tax advantages for the alpaca farmer.
The fact is that Uncle Sam will pay for a portion of the cost of acquiring your herd, assuming you are currently paying income tax and plan to continue paying income tax over the next six years. You can write 100% of your original purchase price off, up to a maximum of $100,000, in the year of purchase. If you are in the 45% tax bracket, the deductions for depreciation that the animals are eligible for may save you up to 45% in cash, of your original purchase price.
If you were to buy ten females for $150,000, pay $50,000 down, and take advantage of IRS code section 179 and the 50% bonus depreciation, insure the animals and finance the balance over 4 years, the government would give you a tax refund of $60,987 and you would have cash out of pocket of $5,719 in the first year. This assumes you are in a 45% tax bracket (state & federal). The total after tax cost of your $150,000 would be $106,798. In other words, your tax refunds would pay for $43,202 worth of your purchase. (See page 7 for the complete detail.)
If you would like Northwest Alpacas to compute the after-tax cost of your prospective alpaca purchase according to the 2003 tax law, please email Alan Cousill at alan@alpacas.com. He will be glad to do a six-year projection that calculates the after-tax cost of your alpacas.
I recommend that you engage an accountant for advice in setting up your books and determining the proper use of the concepts discussed in this article. The aim of this discussion of IRS rules is to make you more conversant with the issues of taxation.
http://www.alpacas.com/Resources/TaxPlanner.htm
Alpaca Taxes 2003:
Why Not Have Uncle Sam Help You Buy Your Alpacas
By Mike Safley
Raising alpacas can offer the farmer some very attractive tax advantages. In 2003 those benefits got a lot better due to the "Jobs and Growth Reconciliation Tax Act." which was enacted into law on May 28, 2003. The new rules have added several powerful incentives for people who buy alpacas. They are: 1) The 179 deduction has been raised from $25,000 to $100,000, and 2) The bill raised the 30% bonus depreciation to 50% in the first year of purchase. These benefits are for assets placed in service after May 5, 2003 and they expire in December 2004.
If alpacas are raised for profit, all the expenses attributable to the endeavor can be written off against your income. Expenses would include not only feed, fertilizer, veterinarian care, etc., but depreciation of such tangible property as breeding stock, barns and fences, all of which can help shelter current cash flow from tax. Beyond these basics there are several strategic tax advantages for the alpaca farmer.
The fact is that Uncle Sam will pay for a portion of the cost of acquiring your herd, assuming you are currently paying income tax and plan to continue paying income tax over the next six years. You can write 100% of your original purchase price off, up to a maximum of $100,000, in the year of purchase. If you are in the 45% tax bracket, the deductions for depreciation that the animals are eligible for may save you up to 45% in cash, of your original purchase price.
If you were to buy ten females for $150,000, pay $50,000 down, and take advantage of IRS code section 179 and the 50% bonus depreciation, insure the animals and finance the balance over 4 years, the government would give you a tax refund of $60,987 and you would have cash out of pocket of $5,719 in the first year. This assumes you are in a 45% tax bracket (state & federal). The total after tax cost of your $150,000 would be $106,798. In other words, your tax refunds would pay for $43,202 worth of your purchase. (See page 7 for the complete detail.)
If you would like Northwest Alpacas to compute the after-tax cost of your prospective alpaca purchase according to the 2003 tax law, please email Alan Cousill at alan@alpacas.com. He will be glad to do a six-year projection that calculates the after-tax cost of your alpacas.
I recommend that you engage an accountant for advice in setting up your books and determining the proper use of the concepts discussed in this article. The aim of this discussion of IRS rules is to make you more conversant with the issues of taxation.
http://www.alpacas.com/Resources/TaxPlanner.htm
