When to Replace Machinery Under Accelerated Deprecation Laws

The last several years have seen tax law changes that provide accelerated depreciation for farmers. The most recent tax law is the Job Creation and Worker Assistance Act of 2002. Accelerated depreciation laws seem to be designed to help stimulate the economy by encouraging farmers to purchase more machinery and to replace machinery more often. Farmers do benefit because lower taxes this year are probably better than lower taxes in future years (as long as marginal tax rates are the same). Less clear, however, is whether farmers should actually replace machinery more frequently. In other words, is the optimal lifespan of an asset reduced due to new. This paper tests for the optimal replacement age under conventional and accelerated deprecation laws and finds that accelerated deprecation laws appear to help farmers

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Conference Paper/ Presentation
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Not presented at conference. Deleted by authors 1/16/07.
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Selected Paper 134898

 Record created 2017-04-01, last modified 2020-10-28

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