WASHINGTON — Legislation allowing businesses to write off up to $500,000 of an equipment purchase made in 2014 was signed by President Barack Obama Dec. 19, as farm equipment dealers geared up for a flurry of year-end business.
Congress voted Dec. 16 to extend the provision, Section 179 of the Internal Revenue Code, as part of H.R. 5771, which extends more than 50 tax policies covering various areas.
The temporary extension of Section 179 applies to purchases made prior to Dec. 31, 2014.
Expired
The tax provision, up until its expiration in 2013, allowed farmers and other small business owners to write off up to $500,000 in capital purchases such as equipment, along with allowing for a 50 percent depreciation deduction each year. This month’s Congressional action reinstates that allowance.
“The trend has been that they would pass a provision in an ‘extender bill,’ generally in two-year chunks,” Larry Gearhardt, a field specialist in taxation in the College of Food, Agricultural, and Environmental Sciences at the Ohio State University, said prior the bill’s passage.
“But because of logjam in Congress, there was no extension into 2014, so (the write-off threshold) remained at $25,000, with no bonus depreciation.”
In order for the purchase to be written off under Section 179, it will have had to have been made in 2014, Gearhardt noted.
Future impact
American Farm Bureau Federation President Bob Stallman is urging Congress to continue working to make Section 179 more than a “temporary fix.”
“Farmers and ranchers need certainty that these provisions will be there in the coming years as they make long-term business decisions,” he said.
The one-year extension of Section 179 is expected to have an almost immediate impact on equipment manufacturers and dealers.
“It has absolutely had an impact,” Kim Rominger, executive vice president and chief executive officer for the Ohio Michigan Equipment Dealers Association, said prior to the vote. “It is a huge incentive for farmers, especially at year end when they are planning for next year.
“Every dollar that can be saved and put back into the business instead of being spent on taxes is a plus.”
