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Depreciation Applies If You Take Delivery

Farmers taking delivery of air seed systems before their business year-end (end of December if you have a calendar year-end) can claim a portion of depreciation for income tax purposes for 2009, says a taxation specialist.

Ron Friesen, a farm tax specialist with Meyers Norris Penny (MNP) in Saskatoon, Sask., says farmers who take delivery of Class 8 machinery, such as seeding equipment, before their business year-end can claim 50 per cent of the allowable annual depreciation the first year.

“According to the Income Tax Act, Class 8 machinery, such as seeding equipment is eligible for 20 per cent annual depreciation,” says Friesen. “In the year of purchase farmers can claim 50 per cent of that depreciation or 10 per cent of the total.”

For example, if the seeding equipment is worth $100,000, the farmer is eligible to claim 10 per cent depreciation the first year, or $10,000. In subsequent years the full depreciation (20 per cent) applies to a declining balance. In the year of purchase, the producer can claim 10 per cent on the full $100,000 value ($10,000); in year two they can claim 20 per cent on $90,000 ($18,000); in year three they can claim 20 per cent on $72,000 ($14,400) and so on.

Even though the air seeding system isn’t going to be used in December 2009, as long as a producer takes delivery, the depreciation applies.

Class 10 machinery, which is motorized machinery such as a tractor, is eligible for 30 per cent depreciation.

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