The 2025 tax law has reshaped the way agricultural businesses handle trades of machinery and equipment, with significant implications for income tax reporting and personal property taxes. If your farm or ag-related business regularly upgrades equipment, the new rules could change how you plan and report those transactions. 

The Pre-2025 Landscape 

Before 2018, when machinery or equipment was traded for similar property, most transactions qualified for like-kind exchange treatment. That meant no gain or loss was recognized on the trade. Instead, you capitalized the “boot” (the difference you paid) and depreciated it over the asset’s life or accelerated it with bonus depreciation or Section 179. 

From 2018 onward, federal tax law removed like-kind treatment for personal property, requiring recognition of gain or loss on the trade-in. Nebraska later passed a temporary fix allowing like-kind treatment for state personal property tax purposes, but that rule applied only to property expensed under Section 179 during 2018–2019. 

How Have The 2025 Rules Affected Machinery and Equipment Trades?  

Under current law, personal property trades are fully taxable events for federal purposes. These rules are not new for 2025; they continue the changes first introduced in 2018. However, the 2025 law permanently removed like-kind treatment for equipment trades. This means: 

• You must recognize gain on the value of the equipment you trade in. 
• You can depreciate the full cost of the new equipment (new or used) using regular depreciation, bonus depreciation, Section 179, or a combination. 

Example:

Farmer John trades in a fully depreciated tractor with a trade value of $90,000 for a new tractor worth $150,000. 

• Under today’s law, John recognizes a $90,000 gain on the trade. 
• He then capitalizes and depreciates the full $150,000 cost of the new tractor. 
• With bonus depreciation and Section 179 available, many farmers can still offset most or all the gain in the same tax year, but the gain must still be reported.
  

Nebraska Personal Property Tax Considerations 

For Nebraska personal property tax purposes, the full federal cost basis of the asset is reported. That means: 

• In the example above, John now reports $150,000 for personal property tax, not just the $60,000 boot. 

This can significantly increase your property tax valuation and annual bill. The 2025 tax law did not restore like-kind treatment for personal property at either the federal or Nebraska level, so farms should budget for this increased reporting value going forward. 

Machinery Trade Example: Old Law vs. Current 2025 Rules

What Should Farmers Do Now? 

Track Gain Recognition Closely 

Even if you can offset the gain with depreciation, it still impacts your return and may affect other tax calculations.

Leverage Bonus Depreciation and Section 179 Strategically

With bonus depreciation still in place at 60% for 2025, timing purchases and trades can help manage taxable income.

Plan for Property Tax Increases

Factor the higher reported basis into your annual budget so the increased valuation doesn’t come as a surprise.

Document Everything

Keep invoices, trade agreements, and depreciation schedules organized. Your tax preparer will need the details to properly report transactions.

Get Expert Help Navigating 2025 Farm Equipment Trade Tax Rules 

The 2025 tax rules make trades of machinery and equipment more visible on both your federal return and your Nebraska personal property tax return. Lutz’s agriculture accounting and consulting services help you navigate the new rules, evaluate the tax impact before you trade, and create a strategy that minimizes surprises. Contact us to discuss your next equipment purchase or trade.