While every agricultural operation depends on reliable equipment, the real value of equipment comes from operation – not ownership. Many producers choose leasing as a financing option to help improve efficiency, increase cash flow and lower tax liabilities. Additionally, leasing is a great opportunity to help farmers and agribusinesses manage substantial new changes to the tax law.

For Devonna Smith, CFO at Chappellet Vineyard in St. Helena, the key to remaining successful is to stay focused on long-term goals. “Tax reform laws should not be a driving force behind making changes to the long-term financial plan of the company,” she said. “But obviously the tax rate reduction to 21% will have a positive impact on our cash flow. This has allowed us to move forward with capital projects we had postponed due to cash flow considerations.” Chappellet’s ability to expense what was formally considered capital expenditures has allowed the winery to reevaluate their timing.  “With the new cap on tax deductibility of interest expense, it makes leasing versus borrowing even more appealing.”  American AgCredit and Chappellet have enjoyed a long-term business relationship which has recently expanded to include the leasing of barrels and new solar panels to power their operations.

Farmers and Agribusinesses can use leasing to:

• Leverage 100% bonus depreciation and increased Section 179 deductions using conditional sale leases to take advantage of deductions as tax owner while preserving your working capital;
• Enhance planning with steady, annual write-offs of lease payments with true tax leases rather than 100% expense in the first year only;
• Maximize the value of depreciation of an asset and lock in long-term fixed rates via lower lease rates on true tax leases;
• Preserve cash, working capital and other credit lines; and,
• Mitigate net operating losses, which now have various limitations on carry-forwards and carry-backs, by shifting depreciation deductions to the lessor on true taxes leases.

Leasing provides additional advantages including helping farmers and agribusinesses to save money on equipment with special pricing, to pay only for the value of the equipment used, to help win the battle of inflation with fixed rates and no down payments, and to free up capital for income-earning investments.

To learn more about leasing with American AgCredit, contact us at 800-800-4865 or online at AgLoan.com.

The federal tax legislation has wide-ranging implications for many farmers and agribusinesses, and the substantial changes may impact each taxpayer differently. It is important to consult with your tax advisor regarding your individual tax situation.