Question

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?

Answer

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.

 

 

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