Does this added information make a difference for placing the tractor in service? Thanks so much for answering our question, we really appreciate your help!
Yes and no. Unfortunately, with my three rentals I don't have an experience of my own to draw from and relate to your situation with. But I'll do my best based on my own "line of thinking" as I make what will probably be a futile attempt to imagine such a situation.
First let me start by stating the obvious. Understand that depreciation is not a permanent deduction. At some point in your life there will come a time when you will no longer have that tractor for whatever reason. Believe it not, there are those who do not realize that depreciation is not a permanent deduction. So at some point in the future when you sell or otherwise dispose of that tractor, all depreciation taken on it has to be accounted for. Typically, when you sell an asset, you are required to recapture all depreciation taken on that asset and pay taxes on it in the year you sell or otherwise dispose of it. Two things about that.
1. Recaptured depreciation is taxed anywhere from 0% to a maximum of 25%. It just depends on the numbers.
2. Recaptured depreciation is added to your AGI in the year of recapture. Depending on the numbers, that could bump you into the next higher tax bracket.
Now when it comes to selling used motorized equipment, (particularly cars) even with depreciation recapture taken into account, it's not common to show a taxable gain on such an asset anyway. But you still have to account for that depreciation even though it may not be taxed.
One thing for you, is that the tractor is not a 100% business asset. Since it's used for both personal use on your 50 acres and business use on the rental 35 acres, that means "at best", you have 35/80 or 43% business use. But that's assuming you will use it "exactly" 43% of the time for the rental, every single year. On a realistic front, you'd have some years where it might be less than 43%, and other years where it's more than 43%. I'm sure the business use percentage will change every year, and the TTX program can not deal with that in a way that would allow the program to track the year to year depreciation correctly. In my opinion (and we all know what opinions are like!) that would complicate the manual book keeping required on your part, to keep things straight. You'd also most likely have to perform "over-rides" in the program every year, to keep things straight in the program. Two things happen when you do an over-ride.
1. You can not e-file the tax return. You have to print, sign and mail it to the IRS. Same holds true for the state return, if your state taxes personal income.
2. A program over-ride will void the TurboTax 100% Accuracy Guarantee.
So if I were in your shoes, I would just go with actual costs. For example, since the driveway is shared by you and the tenant, you can claim 43% of the cost of fuel used to clear snow off the driveway as a maintenance expense. Whereas if you use the tractor to dig a hole for a new septic tank for the rental property, then 100% of the fuel costs for that would be a valid rental expense.
I'm confident others will drop in here with more information, and suggest you consider all avenues before making a final decision. Generally, (not always) once a path is chosen on the tax front, it's either impossible or extremely difficult, time consuming and costly to "change your mind" later.
In my own experience, what may be easy and cost saving on the tax front today, has a decent potential to "bite you in wallet" later.
