Finance
One of the most common mistakes in year-end planning is focusing exclusively on the current tax year.
What Are the Farm’ s Needs?
A tax deduction alone rarely justifies purchasing equipment that isn’ t needed. Most producers have heard the old saying,“ Don’ t spend a dollar to save 30 cents in taxes.”
So, before considering the tax consequences, first of all, evaluate whether the machinery will provide a significant improvement in productivity, reliability, and labor efficiency. Will it cut down on fuel consumption, repairs, and other operating costs? If the answer is yes and the operation has had a good year, then tax planning may help determine whether now is the right time to move forward with those purchases. Producers who understand both the costs and the tax implications of a purchase are in a stronger position to make sound business decisions.
Understanding Section 179
For many years, Section 179 of the tax code has been the farmer’ s best friend. And it remains one of the most valuable tax tools available to equipment buyers. It allows producers to deduct the cost of qualifying equipment in the year it is placed into service rather than depreciating it across multiple years. For the 2026 tax year, the Section 179 deduction limit is $ 2.56 million, with a phase-out beginning when total qualifying purchases exceed $ 4.09 million. For many family farms, those limits are high enough that most planned machinery purchases can potentially qualify for immediate expensing. Even large farms can benefit from this provision as it can make a big dent in the operation’ s tax bill.
Here are some common examples of qualifying purchases:
• Tractors and combines
• Planters, sprayers, and tillage equipment
• Grain handling systems
• Livestock equipment
• Utility vehicles and certain farm-use vehicles
• Irrigation and farm infrastructure improvements that meet IRS requirements
One of the big reasons why producers appreciate Section 179 is its flexibility. The deduction is elective, allowing operators and their tax advisers to determine how much of an asset’ s cost to expense in a given year. That flexibility can be especially useful when balancing income across multiple years or managing tax brackets.
Bonus Depreciation Is Back in the Conversation
For years, Section 179 has been the go-to strategy for deducting equipment purchases. While that is still the case in many situations, it’ s time to give bonus depreciation another look. Why? Because recent federal tax changes have restored
18 | 800-247-2000 | 515-955-1600 | October 2026