Finance
100 % bonus depreciation for many qualifying assets acquired after January 19, 2025. Simply put, eligible equipment can now be fully deducted in the year it is placed into service rather than depreciated through several years.
At first blush, you may be thinking that bonus depreciation and Section 179 are pretty much the same thing. After all, both may allow a producer to write off a large equipment purchase in the current tax year. True enough. But there are some important differences, and they become more apparent when dealing with larger purchases, lower-income years, or long-term tax planning.
One major distinction is that Section 179 is elective and subject to annual limits. In addition, the deduction generally cannot exceed taxable business income. Bonus depreciation works differently. It is not limited by taxable income and can potentially create or increase a business loss that may be used under other tax rules. It also is not subject to the same dollar limitations that apply to Section 179.
Illustrating the Difference
Farmer A is a grain producer. He purchases a used tractor for $ 180,000 near the end of the year. The farm has generated strong profits this year and expects a sizable tax bill. In this situation, Section 179 may be an excellent fit because the producer can elect to expense the entire purchase and immediately reduce taxable income.
Farmer B is in a slightly different situation. He runs a livestock operation and purchases $ 400,000 worth of equipment following a difficult year marked by drought, lower calf prices, and disappointing yields. Because taxable income is limited, the operation may not be able to fully benefit from Section 179 alone. But bonus depreciation could provide additional flexibility because it is not constrained by the same business-income limitations.
Now, consider Farmer C’ s position. He is also a grain producer, and he purchases a new combine for $ 650,000 and several supporting pieces of equipment before yearend. Depending on income levels and overall tax strategy, the producer may choose to apply Section 179 to a portion of the purchases and use bonus depreciation on the remainder. That approach can maximize deductions while still preserving flexibility for future years.
So, the two provisions are not an either-or decision. Producers often use Section 179 first and then apply bonus depreciation to the remaining basis of the equipment. The best choice depends on profitability, financing arrangements, ownership structure, future income expectations, and state tax rules. That is why many farm accountants encourage producers to think beyond the current year’ s tax return. A large deduction today may have the farmer pumping his fist and feeling really
October 2026 | www. FarmersHotLine. com | 19