By Jessica Lehmen, CPA, Member, Williams-Keepers LLC
If you’re a farmer or rural business owner, you’re probably considering multiple pre-New Year priorities. From a CPA’s seat, the most valuable year-end decisions focus on strategies to strengthen the financial foundation that supports your operation for years to come. Here are three considerations to keep in mind to prepare for what’s ahead.
Tax strategy should protect cash flow and borrowing flexibility
Equipment purchases and depreciation elections can reduce taxable income, but they also affect liquidity, debt service and future borrowing capacity. The One Big Beautiful Bill Act (OBBB) restored the 100% bonus depreciation and expanded Section 179 rules, providing the ability to write off many fixed asset purchases. However, it’s critical to balance tax savings with your future cash flows.
Example: Instead of fully expensing every piece of equipment purchased this year, a producer may choose to bonus depreciate or elect 179 on larger assets while spreading deductions on others. This can lower taxes at your highest marginal rates while spreading some of the deduction to match the timeline you pay down the acquisition debt.
One-year decisions have multi-year consequences
Agriculture rarely fits neatly into a single tax year. Because factors like weather, markets and production cycles influence income, year-end planning works best when it looks ahead. Some deductions may be more valuable in future years, and other deductions, such as retirement contributions, can reduce taxes while saving the money for your future self.
Example: A farm expecting stronger income next year might defer certain deductions while maximizing retirement plan contributions now. That approach reduces taxes today by investing in your own retirement, while preserving deductions that may be worth even more when income and tax rates are higher.
Tax and succession planning should always be connected
Recent tax law changes, like the permanent estate tax exemption increase, Missouri’s capital gains deduction and new options for spreading the tax on farmland sales, have made transition planning more complex, but also more flexible. Decisions about selling equipment, transferring land or preparing the next generation now carry broader implications.
Example: A family considering selling a parcel of farmland to the next generation may consider whether to use strategies to ease the tax hit of the gain or whether they should instead hold the land to benefit from an eventual step-up in basis at death.
Year-end planning isn’t about checking boxes. It’s about making informed decisions that align tax strategy with the realities of your farm and family. A thoughtful review before December 31 can help ensure that today’s choices support tomorrow’s opportunities.
Jessica Lehmen, CPA, is a WK Member specializing in tax and accounting services for businesses and individuals, with an emphasis on agribusiness and state and local taxation.
