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

Aug 29, 2023
Every day is a great day to be in the beef business and this year has proved to be another excellent year in the cow/calf   and feedlot sectors of beef production. 
Aug 29, 2023
I hope you all had a fantastic August. Although we had a few days of hot weather toward the end of the month, cooler days are coming. It’s less than 120 days until winter. Soon we’ll be digging out the warm clothing and finding our boots to prepare for the colder weather that is surely on its way. If you haven’t locked in your propane supply but would still like to, please call your local Premier Energy office to see if the lock in price has changed.
Aug 29, 2023

I hope everyone had the chance to enjoy the Independence Day holiday with family and friends. Thanks to all of you who called in your orders early so our staff could adjust to the mid-week holiday and help minimize the added pressure that the short work week brings. I’d also like to thank all of you who returned your propane contracts by the end of June. With a short window of when contracts are mailed to when they are due back, we really appreciate your patience and support. If reading this reminded you that your contract is still sitting on the kitchen table, just pick up the phone and call the energy office nearest to you. I’m sure we’ll be able to take care of you. The last of the propane contracts (Cap renewals) and safety mailings will be sent out later this month. On behalf of our energy team and everyone at your cooperative, thank you for choosing us to serve your propane needs again this year.