What you need to know about IRS Section 179

What you need to know about IRS Section 179

Section 179 news in review and update on Congressional action to reinstate tax extenders

Update: On Dec. 17, the Senate approved higher Section 179 expensing levels for 2014 as part of a larger tax extenders bill. The bill was then signed by into law President Obama on Dec. 19, 2014.

Because that legislation only covered tax year 2014, the House on Feb. 13, 2015, moved a section 179 extension bill forward for tax year 2015.

Some background (originally posted Dec. 4, 2014):

As farmers and business owners plan ahead for 2015, there's a cloud of uncertainty looming in the tax code: if Section 179 expensing levels will fall to $25,000, as scheduled, or if they will be reinstated to $500,000, as in previous years.

Section 179 news in review and update on Congressional action to reinstate tax extenders

The IRS Section 179 provision allows farmers and business owners to upgrade machinery and make other qualifying purchases while writing off the full purchase price in the current tax year. This is particularly helpful for farmers, as new equipment – and technology – can be considered a "must" for productivity and profitability.

Since 2010, the tax code has allowed for a maximum deduction of $500,000 under Section 179 and a phase-out threshold of $2 million. But for the 2014 tax year, that deduction level fell to $25,000, and the phase-out now rests at $200,000.

But there's good news for farmers and business owners who missed out on the higher levels from 2010-2013: Congress is taking action.

While Section 179 has been in play since the 1980s, let's take a look at the 2014 Section 179 headlines:

January, 2014: Farm finance specialists at the 2014 Farm Futures Business summit warn farmers: Section 179 expensing levels have fallen, and may alter decision-making on new iron purchases.

March, 2014: An Indiana farmer takes a brief look at Section 179 history, and weighs in on what it means for her farm business – and what it could mean for yours, too.

April, 2014: The Senate Finance Committee makes a push to approve a larger package of tax extenders, including higher Section 179 levels, for two years. Meanwhile, the House Ways & Means Committee also approves an extenders bill.

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June, 2014: Farmer Iron's Willie Vogt takes a look at the larger picture of Section 179's impact on equipment purchasing and farm business planning within the realm of Congressional action.

June, 2014: The House approves permanent restoration of Section 179 to the $500,000 level.

July, 2014: Farm Futures' Jacqui Fatka discusses prospects of House and Senate agreement on tax extender packages before the end of the year.

September, 2014: Tax extenders are still stalled in the Senate as time to make capital purchases dwindles to fewer than three months.

November, 2014: As Congress enters the lame duck, business owners wonder when the House and Senate plan to discuss pressing tax issues.

November, 2014: Business groups, including the National Association of Manufacturers, turn up the heat on legislators by underscoring the impacts of tax uncertainty.

December, 2014: The House takes action on tax extenders and Section 179, approving a one-year extension of higher 179 levels retroactively for 2014 via H.R. 5771.

So what's next for tax extenders? Senate Majority Leader Harry Reid is reportedly leaving the door open for the House's one-year extension, and the White House also is receptive.

The discussion, however, extends far past what Congress may do to resurrect tax breaks for 2014. Next year, lawmakers may find themselves wading into familiar waters again as the more than 50 tax breaks, if the House's deal is put through its paces, will only be in effect through Dec. 31.

For more coverage, see what others have to say on the path forward for U.S. tax code and tax extenders:

• The four tax breaks (and two Senators) that killed the tax extender deal. Forbes commentary
• How immigration killed the tax deal. Politico
• Bare-minimum tax break plan won't get Senate changes, Wyden says. Bloomberg

Also view the Section 179 IRS resource page and the Section179.org webpage for more information.

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