I have a question about farm deductions. Last year I purchased a vehicle for my agricultural business and I would like to take the full deduction this year rather than depreciating it? Is that allowed?
The maximum Section 179 expense deduction is $1,040,000. It’s reduced dollar-for-dollar for qualified expenditures more than $2 million.
The Section 179 deduction is limited to:
- The amount of taxable income from an active trade or business
- $25,900 for SUVs and other vehicles rated at more than 6,000 pounds but not more than 14,000 pounds
The $25,900 limit doesn’t apply if your vehicle is:
- Designed for more than nine passengers behind the driver’s seat
- Equipped with a cargo area of at least six feet in interior length that’s not readily accessible from the passenger compartment
- A vehicle that:
- Has an integral enclosure fully enclosing the driver compartment and load-carrying device
- Doesn’t have seating rearward of the driver’s seat
- Has no body section protruding more than 30 inches ahead of the leading edge of the windshield
You can carry over costs for an unlimited number of years that:
- You expense using the Section 179 deduction
- Are limited due to the business income limitations
Vehicle expenses have a separate limitation for the maximum amount of depreciation you can take. The limitation is based on these factors:
- If the vehicle is a car, truck, or a van
- If it’s an electric vehicle
- If you have chosen to take special or bonus depreciation
- If the vehicle is bought or leased
You can carry over any amounts over the maximum that you can’t claim in 2020.
Learn whether you can claim the earned income tax credit if you are separated from your spouse with advice from the tax experts at H&R Block.
Need some tips on how to deduct business expenses? Learn more from the tax experts at H&R Block.
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