Year-End Tax Moves in a Tight Year: Check Your Cash Before the Write-Off
Thombar Team
By the Thombar team
tl;dr: A tight margin year, taxable USDA aid and generous write-off rules are pushing many growers toward big year-end purchases. Extension and CPA guidance points the same way: check how many months of cash you will have left after the purchase before you check the deduction. Because 100% bonus depreciation is now permanent, a needed purchase in January still gets the same treatment, just one tax year later.
What happened
Three things are landing on the same growers this fall.
First, more of this year’s income came from the government. The Assistance for Specialty Crop Farmers (ASCF) program put about $1.625 billion in one-time payments on the table, at $650 an acre for Tier 1 crops, $225 for Tier 2 and $65 for Tier 3, with a $250,000 cap per person or legal entity. Applications closed August 7, 2026, and payments started shortly after approval (Vegetable Growers News, June 2, 2026). USDA’s own tax page is plain about it: USDA disaster and program funds are “considered farm income that includes a tax liability for farm businesses” (farmers.gov).
Across all of agriculture, USDA’s September forecast puts 2026 direct government payments at $47.4 billion against net farm income of $158.4 billion, with record farm debt of $605.1 billion and production expenses of $492.8 billion (AFBF Market Intel, Sept. 3, 2026). Put another way, government payments equal about 29.9% of forecast net farm income this year.
Second, the write-off rules are unusually generous. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for property acquired after Jan. 19, 2025, and trees and vines that are planted or grafted still qualify (Oklahoma State University Extension, AGEC-339). For 2026, the Section 179 limit is $2,560,000, with the phase-out starting at $4,090,000 of purchases (Bob Rhea, University of Illinois Tax School, Feb. 11, 2026).
Third, margins and borrowing costs are moving the wrong way. In a September survey of specialty crop growers, 87% agreed that “operating costs are rising much faster than crop prices” (The Packer, Sept. 24, 2026). On Sept. 16 the Federal Reserve raised its target range by a quarter point to 3-3/4 to 4 percent (Federal Reserve).
Why it matters to your P&L and cash
A big aid check can make 2026 taxable income look higher than the farm’s real earning power. The usual reflex is to spend that income down before Dec. 31: a new tractor, a sprayer, a pile of prepaid fertilizer. The tax code allows a lot of that. The question is what it does to cash in February and March, when the next season’s inputs, labor and interest are due and harvest money is still months away.
Two farm business and CPA sources put numbers on the trade-off:
- Tina Barrett, executive director of Nebraska Farm Business Inc., speaking at a University of Nebraska-Lincoln webinar: “I always want to step back anytime we’re buying something just for saving taxes.” Spending $100,000 to save $30,000 to $40,000 in taxes on something the farm does not need leaves the farm worse off than paying the tax and keeping $60,000 to $70,000 in cash (DTN, Dec. 16, 2022).
- A CliftonLarsonAllen example: a farmer considers a $460,000 tractor without the free cash to pay for it. Writing it off saves about $99,306 in income and self-employment tax, but financing it over five years at 8% costs $116,049 in interest (CLA, July 30, 2023). That is $16,743 more in interest than the tax saved, and the tax comes back when the tractor is later sold or traded.
Prepaying inputs has its own limits. A cash-method farmer can generally deduct prepaid supplies only up to 50% of the year’s other deductible Schedule F expenses, and the payment has to be a real purchase of a set quantity at a set price, not a refundable deposit, with a business reason beyond the tax savings (Utah State University Rural Tax Education, Aug. 2025). As an illustration only: a farm with $1,200,000 of other deductible expenses could deduct up to $600,000 of prepaid supplies, subject to the other tests and the exceptions in the rules.
Things to check this week:
- How much 2026 income came from USDA programs. Pull every ASCF or other program deposit. As an illustration only, 200 acres of a Tier 1 crop at $650 an acre is $130,000 of taxable income that may not have a matching harvest margin behind it.
- Cash on hand at Dec. 31 versus what goes out before the next harvest check. Count months of runway, not the bank balance.
- What the operating line costs now. If the line is variable, check whether the Sept. 16 increase has already flowed into the rate.
- Any purchase you are considering only for the deduction. Write down the business reason. If there is none, that is the answer.
- Prepaid inputs. Check whether the quote locks in a price or supply you actually need, and where it puts you against the 50% limit.
Here is what the runway math can look like. This is an illustration with made-up round numbers, not data from any farm.
| Keep the cash | Spend $150,000 before Dec. 31 | |
|---|---|---|
| Cash on hand after Dec. 31 | $400,000 | $250,000 |
| Monthly outflow until first harvest receipts | $90,000 | $90,000 |
| Months of runway | 4.44 | 2.78 |
The tax saved does not come back until the return is filed, and the bills keep coming in the meantime.
The bigger picture
Three points from the sources shape the next one to three seasons for specialty crop finance.
The write-off no longer has a deadline. In earlier years, bonus depreciation was phasing down, so buying before Dec. 31 locked in a bigger deduction. Oklahoma State Extension describes the new 100% rate as permanent for property acquired after Jan. 19, 2025. A needed purchase made in January, when the cash picture is clearer, gets the same treatment, just one tax year later. The urgency to buy in December is weaker than it used to be.
Aid is lumpy and hard to plan around. As of a late August analysis, several more aid proposals were still pending in Congress, from a $10 billion White House request to higher amounts sought by House and Senate members, and none had been enacted (Ag Bull Trading, Aug. 23, 2026). Terrain economists advised growers early this year not to count on more aid when planning cash flow (Terrain, Feb. 3, 2026). Whether any new payment lands in 2026 or 2027 changes which tax year it hits. Growers whose income swings with aid, weather and short crops have more reason to talk with their CPA about tools built for uneven farm income, such as income averaging on Schedule J.
Lenders look at working capital, not the tax return alone. Year-end purchases funded from cash or the operating line show up on the balance sheet that the bank reviews at renewal. The CLA example makes the point: without the purchase, the farm would likely have had “a better working capital position when the farming cycle turns.”
None of this means growers should skip year-end planning. It means the order matters: cash plan first, tax plan second, with both in front of the CPA before December.
How to check your own exposure
Growers can do this themselves in an afternoon:
- Export the 2026 profit and loss and the bank statements, and tag every USDA program payment.
- Build a simple month-by-month cash plan from January to the first harvest receipts: inputs, payroll, fuel, interest and loan payments, against expected settlements and other income.
- List any purchase or prepayment under consideration, with the business reason next to each one and its effect on the cash plan.
- Take that package to the CPA before December, not in March, along with fuel records for any fuel tax credit the CPA thinks applies.
Thombar can make that afternoon shorter. It connects directly to QuickBooks and watches cash on hand, net for the week and open receivables every day. It tracks the cash position and the gap between harvest and next season’s inputs with weekly updates, monitors input expenses such as diesel, fertilizer and packaging with alerts when trends threaten margin, and keeps a running season fuel spend. Thomas, the assistant inside Thombar, answers questions about the books in plain English, including cash analysis. Thombar does not replace a CPA or bookkeeper; it helps growers walk into that meeting with the numbers ready.
For growers who have used up their bank line, or whose bank cannot move fast enough before spring inputs are due, Thombar Capital is a revolving agricultural line of credit with a 24 to 48 hour decision and one flat fee per draw, known before you draw. It uses a soft credit pull only and finances approved supplier purchases only. It is subject to credit approval, and amounts, terms and eligibility vary. If a grower can use their bank, they should. More detail is in this earlier post on Thombar Capital.
This post is general information, not tax, legal or financial advice. Tax rules depend on each operation’s facts; talk with a qualified tax professional before making year-end decisions.
Thombar Capital is powered by Kanmon Inc., California DFPI Finance Lenders Law License #60DBO-144925.
Sources
- Vegetable Growers News: USDA ASCF specialty crop assistance program (June 2, 2026)
- farmers.gov: Taxes
- AFBF Market Intel: USDA Revises Farm Income Higher, but Costs Still Bite (Sept. 3, 2026)
- Oklahoma State University Extension: OBBBA Tax Update, Individual and Farm Provisions (AGEC-339)
- Bob Rhea, University of Illinois Tax School: Farm Depreciation Update (Feb. 11, 2026)
- The Packer: Soaring Operating Costs Threaten Survival of Specialty Crop Growers (Sept. 24, 2026)
- Federal Reserve: FOMC statement (Sept. 16, 2026)
- DTN: Year-End Tax Planning Tips (Dec. 16, 2022)
- CLA: Equipment Purchases, Interest and Taxes (July 30, 2023)
- Utah State University Rural Tax Education: Prepaid Farm Expenses (Aug. 2025)
- Ag Bull Trading: Odds for Farmer Aid and an Ag Labor Bill Before This Congress Runs Out (Aug. 23, 2026)
- Terrain: 2026 Cash Flow Timing for Farmers (Feb. 3, 2026)