The Changing Landscape of Equipment Purchases, Interest, and Taxes in Agribusiness

Aug 09, 2023


Understanding the Balance

Understanding the balance between tax efficiency and long-term debt management is critical in the world of agribusiness, particularly with changes in interest rates and the economy. An insightful article published on CLA Connect explores these financial dynamics. 

The article points out that the desire to reduce a tax bill often leads to the question, "What can I buy?" The appropriate response, however, should consider necessity, affordability, and the potential for long-term financial damage. It explains, "As much as it hurts to write that check to the government, not doing it can create more long-term damage, especially with the drastic change to interest rates we have experienced." 

One of the key arguments in the article is that the purchase of expensive equipment like tractors to offset taxes might result in higher expenses in the form of interest payments over time. "After five years of payments, one might have paid the bank more in interest than the taxes it saved him," the article warns. 

Further, the piece advises a cautious approach when considering big-ticket purchases primarily for tax savings. "Spending for the sole purpose of 'saving' income taxes is not generally the best decision-making model. There needs to be some additional analysis done before the check is written," it notes, recommending a comprehensive review of all factors, not just the potential reduction in tax bills. 

The article underscores the importance of maintaining tax efficiency, managing debt, and sustaining working capital for long-term success in agribusiness. To learn more about these financial dynamics, you can read the full article here. To learn about our prepay options available to help with your tax planning, contact me using the form below. 



David Fiene



Recent Posts

Jun 01, 2024

We began distributing this year’s patronage and equity redemption checks with our May open house events in Mt Horeb, LaFarge, and Westby. With a little help from Mother Nature, we were lucky to have beautiful weather and an even better turnout for each open house. If you were not able to stop in to pick up your check this year, you should see it arrive in your mailbox by mid-June. Checks began getting mailed the last week of May and could take a couple of weeks to complete.

Jun 01, 2024
This month is an exciting time for the energy division. We’ll be mailing the propane contracts and/or safety information to over 15,000 propane customers. Be sure to share the safety information with your entire family.
Jun 01, 2024
Crop management never ends if you want to protect the time and investments you have. As we head into mid-season of the crop calendar a fungicide application should be considered to help you protect and save yield loss if conditions are favorable.