Timing the Nebraska Personal Property Tax Exemption

We previously discussed the math of the Nebraska Beginning Farmer Tax Credit.  Nebraska also offers a personal property tax exemption to beginning farmers for the purchase of personal property, such as machinery, used in the production of agriculture or horticulture.  Unlike the Beginning Farmer Tax Credit, the Personal Property Tax Exemption is provided to the beginning farmer, not the owner of agricultural assets (i.e. the person a beginning farmer leases from).

We have discussed the requirements for eligibility of the personal property exemption previously, but nonetheless, the requirements for the beginning farmer are the same as for the Beginning Farmer Tax Credit, with one exception: the personal property tax exemption does not require the beginning farmer to rent from someone to be eligible.

Why is timing important for the personal property tax exemption?  It is because the personal property tax exemption allows for a personal property tax exemption up to $100,000 a year for three years.  Once a beginning farmer is uses in the program, the beginning farmer may not use it again.  Thus, the beginning farmer should time when they apply for the tax exemption so as to maximize its potential.

Lets say that you are a beginning farmer.  Your business plan is to grow your business slowly but steadily.  Your business plan calls for you to steadily purchase equipment and machinery throughout your ten years as a beginning farmer.  You may begin with a drill or small tractor.  You plan to expand to a larger tractor and perhaps haying equipment.  Or, your operation may require specialized equipment.

Knowing this, it is best to plan when to apply for the personal property tax exemption at a time in your operation when you plan to outlay the most money on personal property purchases.  That way, the beginning farmer can use the personal property tax exemption to the maximum effect, helping the cash flow of the operation.

Keep in mind that the application for the personal property tax exemption is due by November 1st of the year prior to the year the exemption is sought.  For example, to apply for the exemption for 2014 through 2016, a beginning farmer must apply to the Beginning Farmer Board by November 1, 2013.  Then, to claim the exemption, the beginning farmer must present the eligibility certificate issued by the Beginning Farmer Board to proper county assessor by December 31 for approval.

Have questions?  Or just want to talk about the math?  Feel free to contact us!