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Section 179: What You Need To Know

As the year comes to a close, it’s a good time to start gathering the information you will need to complete next year’s taxes – including purchases that qualify for deduction under Section 179.

Section 179 of the IRS tax code allows farming operations and other businesses to deduct the cost of certain types of property rather than requiring the cost of the property to be capitalized and depreciated. This is particularly helpful for farmers who have upgraded equipment and technology in order to improve productivity and profitability.

There are, however, some restrictions that apply to Section 179 deductions. According to the IRS: 

  • The 2016 deduction limit is $500,000 and is good on new and used equipment.
  • The 2016 spending cap on equipment purchases is $2,000,000. This is the maximum amount that can be spent on equipment before the Section 179 deduction begins to be reduced on a dollar for dollar basis.
  • The 2016 bonus depreciation is 50 percent. Available for new equipment only, this is generally taken after the Section 179 spending cap is reached.

Qualifying purchases include:

  • Equipment purchased for business use such as center pivots
  • Personal property used in business
  • Business vehicles with a gross vehicle eight in excess of 6,000 lbs.
  • Computers
  • Computer “Off-the-Shelf” Software. (Software available to the public).
  • Office furniture
  • Office equipment
  • Property attached to the building but not a structural component (i.e.: printing press, etc.)

To qualify for the Section 179 deduction, the equipment must be financed/purchased and put into service by the end of the day December 31, 2016.

For more information, talk to your accountant or visit www.section179.org