Great News For Alpaca Breeders

Can I be your little tax deduction?

Great News For Alpaca Breeders

Jobs and Growth Tax Relief Reconciliation Act of 2003 as
Modified by Congress May 25, 2007

Congress passed a $350 billion tax cut, known as the Jobs and Growth Tax Relief Reconciliation Act of 2003. There are several provisions that may affect your net income as an alpaca breeder. The Small Business and Work Opportunity Act of 2007 extends the expanded benefits through 2010. The best news is that these allowances can be used to offset any other source of earned income.

Taxpayers can depreciate property on a class-by-class basis, i.e., over 3, 5, 7 ,10 years etc. This privilege, combined with the ability to claim any portion of the $125,000 first year expense allowance on both used and new assets, provides tremendous flexibility in tax planning.

New Capital Gain Rates
Special lower rate for taxpayers in the bottom two ordinary brackets drops from 10% to 5%. These new lower rates are effective for sales after May 5, 2003, and remain in effect through December 31, 2010.

Section 179 First Year Depreciation Allowance

President Bush signed H.R. 2206, the Small Business and Work Opportunity Act of 2007, into law on May 25, 2007. The Act extends the expanded benefits of Section 179 through tax year 2010 and increases the maximum annual deduction from $112,000 to $125,000 for purchases made in 2007. The amount of annual cost additions that trigger a phase-out of the 179 deduction was increased from $450,000 to $500,000. This means the $125,000 limit is reduced by the amount by which the total cost of the property placed in service during the tax year exceeds $500,000. For a detailed description for the Section 179 deduction, see IRS Publication 225, "Farmer's Tax Guide", Chapter 7.

Tax Year 2006        $108,000
Tax Year 2007     $125,000
Tax Year 2008      $125,000 + COLA
Tax Year 2009       $125,000 + COLA
Tax Year 2010     $125,000 + COLA
Tax Year 2011       $25,000

For 2004 through 2010, the annual amounts are to be adjusted for inflation. Up until recently, the Section 179 election was only allowed on originally filed tax returns. People who overlooked it were not allowed to claim it on amended returns. This new law allows the Section 179 expensing election to be claimed or revoked on amended returns for 2003 through 2010.

Disclaimer: This is information only, not tax advice. Please check with your accountant or a tax advisor who is familiar with breeding livestock and farming issues for a professional definition of the Jobs and Growth Tax Relief Reconciliation Act of 2003 and how these new developments will affect your particular situation.