Section 179 and Bonus Depreciation Details


Section 179 Expensing and the Bonus Depreciation are designed help businesses keep more capital, while also getting needed equipment, vehicles, and software.  However the clock is ticking.  Only equipment or software purchased and put into use before the December 31st deadline qualifies.  Nothing has been decided as this point for the 2015 tax year and hopefully will not again be decided in mid December.


Northern Ag's Russell Nemetz spoke with Curt Barnekoff, a certified public accountant with Galusha, Higgins and Galush for a little insight into Section 179 and the Bonus Depreciation.  One of the key questions was with just a few days left in the year, if these new purchases had to be physically on the farm or ranch to avoid being in violation of the IRS tax law.  

CLICK HERE to listen to the interview.

What was covered in the 2014 Tax Extenders package passed by Congress:

Tax Extenders – Section 179 Expensing

Section 179 Expensing

  • Reauthorized 2014 Limits: 
  • $500,000 total deduction
  • Purchases not to exceed $2,000,000
  • Fully phased out at $2,500,000 of purchases


Tax Extenders – Bonus Depreciation

Bonus Depreciation – Reauthorized (50{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} Bonus Depreciation)
What Is Bonus Depreciation?

  • Applies to certain qualifying property
  • New, placed in service during the year, 20 years or less
  • Depreciation deduction for 50{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} of cost
  • Encourages reinvestment in new capital assets
  • Purchase of $250,000 new tractor would allow bonus depreciation of $125,000 and reduce taxes by $43,750 using a 35{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} tax rate


Answers to Common Section 179 Questions

From the Website.  
(NOTE:  The Section179 Calculators have not yet been updated)

What Sort of Equipment Qualifies in 2014?

Most tangible business equipment qualifies. 

  • Equipment (machines, etc) purchased for business use
  • Tangible personal property used in business
  • Business Vehicles with a gross vehicle weight in excess of 6,000 lbs (Section 179 Vehicle Deductions)
  • Computers and Computer “Off-the-Shelf” Software
  • Office Furniture and Office Equipment
  • Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
  • Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes). 

List of Section 179 Non Qualifying Property

  • Real Property does not qualify for the Section 179 Deduction. Real Property is typically defined as land, buildings, permanent structures and the components of the permanent structures (including improvements). Other examples of property that would not qualify for the Section 179 Deduction include paved parking areas and fences.
  • Air conditioning and heating equipment 
  • Property used outside the United States 
  • Property that is used to furnish lodging 
  • Property acquired by gift or inheritance, as well as property purchased from related parties.  (No, you can't sell equipment to yourself and qualify for Section 179)
  • Used Equipment (that is new to you) qualifies for Section 179, however used equipment does not qualify for Bonus Depreciation.

Does lease equipment qualify for Section 179?

Yes. The obvious advantage to leasing or financing equipment and/or software and then taking the Section 179 Deduction is the fact that you can deduct the full amount of the equipment and/or software, without paying the full amount this year. The amount you save in taxes can actually exceed the payments.

 CLICK HERE for more Detail

How do I elect to take the Section 179 Deduction?

To elect to take the Section 179 Deduction, simply fill out Part 1 of IRS form 4562, and attach it to your tax return.  You may claim Section 179 deductions up to the due date (including extensions) for filing your taxes for the tax year you are claiming the deduction. Initially you were not allowed to claim Section 179 for previous tax years – however, under Rev. Proc. 2008-54 you are now able to amend and elect Section 179 if you previously did not for tax years beginning after 2007 and through currently 2014.

For more detailed information, check the website or contact your tax preparer.  



© Northern Ag Network 2014

Jami Howell

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