How to Write Off Farm Equipment on Taxes: Section 179 and Depreciation

To write off farm equipment on your taxes, you stack three federal tools in a specific order: Section 179 immediate expensing first, 100% bonus depreciation on whatever basis remains, and standard MACRS depreciation for anything left over. With bonus depreciation permanently restored to 100% by the One Big Beautiful Bill Act signed July 4, 2025, most qualifying farm equipment purchases can be deducted in full in the year you place them in service.¹ Which tool does the heavy lifting depends on your income for the year and whether you want the deduction to create a loss you can carry back.

What Counts as Deductible Farm Equipment

Two conditions gate every deduction on this page. You have to be in the business of farming, and the equipment has to be used more than 50% in that business.² The 50% test isn’t a one-time check at purchase. If business use later slips below that line, you owe back a portion of the deduction you already claimed.

Eligible property covers the obvious machinery — tractors, combines, planters, tillage implements, sprayers — and extends further than many farmers realize. Breeding livestock (dairy cows, bulls, brood mares) is depreciable property. So are single-purpose agricultural structures like milking parlors, hog confinement buildings, poultry houses, and greenhouses used exclusively for growing plants.³

Watch the “single-purpose” label. A greenhouse used entirely for wholesale nursery production qualifies. The same greenhouse with a retail sales area inside does not, and the structure gets pushed into a much longer recovery period.

Section 179: Immediate Expensing

Section 179 lets you deduct the full purchase price of qualifying equipment in the year you place it in service instead of spreading the cost over years. You make the election on Part I of IRS Form 4562.⁴

The OBBBA doubled the limits. For tax years beginning in 2026, you can expense up to $2,560,000 in qualifying property. The deduction phases out dollar-for-dollar once total equipment purchases exceed $4,090,000.⁵ Both figures are indexed for inflation.⁶

A worked example: if your farm places $4,500,000 in qualifying equipment into service during 2026, the $2,560,000 limit is reduced by the $410,000 overage above the $4,090,000 threshold, leaving a maximum Section 179 deduction of $2,150,000.

The Income Cap

Section 179 has one limit that bonus depreciation doesn’t: your deduction cannot exceed your total taxable income from all active businesses for the year. Earn $180,000 from farming with no other active business income, and your Section 179 deduction stops at $180,000 no matter how much equipment you bought. Anything disallowed carries forward indefinitely to offset income in later years.⁷

This trips up smaller operations. A thin profit year plus an expensive equipment purchase equals a capped write-off, and the cash-flow benefit you planned on doesn’t arrive when you need it.

The election also has to be made on a timely filed return (including extensions) for the year you place the property in service. Once made, it can only be revoked with IRS consent, so choose carefully which assets get Section 179 treatment.

100% Bonus Depreciation

Bonus depreciation had been phasing down under the original Tax Cuts and Jobs Act schedule: 80% for 2023, 60% for 2024, 40% for 2025, and headed to zero. The OBBBA reversed that. For qualifying property acquired after January 19, 2025, the bonus rate is permanently 100%.¹

Three features make this the single biggest change to farm equipment planning in years:

No annual dollar limit and no phase-out based on total investment.
No taxable income limitation, so the deduction can create or increase a net operating loss.
Applies to both new and used equipment, as long as the equipment is new to your farm. A used combine bought from another operation qualifies just as well as one ordered from the dealer.

The acquisition date (generally when you enter a binding purchase contract) has to be after January 19, 2025.¹

You can elect out of bonus depreciation on a class-by-class basis by attaching a statement to Form 4562. That might make sense if your income is low this year but expected to be much higher soon, and you’d rather spread deductions over the MACRS recovery period to offset income taxed at higher rates. With the 100% rate now permanent, though, there’s less pressure to use it before it disappears.

Choosing Between the Two — and Stacking Them

The deductions layer in order. Section 179 applies first and reduces the asset’s depreciable basis. Bonus depreciation then applies to whatever basis remains. Anything still left over flows into standard MACRS depreciation.

With bonus depreciation back at 100%, the entire cost of qualifying equipment gets deducted in year one either way. The strategic difference comes down to two things.

The income cap is the first. Section 179 can’t exceed your active business income. Bonus depreciation can. If you want the deduction to create a loss, bonus depreciation has to do the work.

The second is net operating losses. A farming loss created by bonus depreciation can be carried back two years for a tax refund, then forward indefinitely. Section 179 can never generate an NOL because it’s capped at income to begin with.⁸

For a farm with steady or growing income, it rarely matters which mechanism handles the write-off. For a farm that just had a banner year and buys equipment in December to offset it, both tools work. For a farm planning a large purchase in a lean year specifically to generate a carryback refund, bonus depreciation is the only path.

MACRS When You Have Basis Left

When you elect out of bonus depreciation, or you have basis remaining after a partial Section 179 election, the Modified Accelerated Cost Recovery System spreads the cost over a set number of years. MACRS assigns each asset a recovery period based on type.

Recovery Periods

The new-versus-used distinction matters. Farm machinery where original use begins with you (brand-new equipment) placed in service after 2017 is 5-year property. Used farm machinery is 7-year property.³ Common categories:

5-year: new tractors, combines, planters, and other farm machinery where your farm is the first user.
7-year: used farm machinery, grain bins, cotton ginning assets, and fences.
10-year: single-purpose agricultural and horticultural structures (milking parlors, poultry houses, greenhouses used solely for growing).
15 or 20-year: land improvements like drainage tile, irrigation systems, and general-purpose farm buildings.

Method and Timing

For farm property placed in service after 2017, you can use the 200% declining balance method for assets in the 3-year through 10-year classes, which front-loads deductions into early years. The 150% rate still applies to 15-year and 20-year farm property.³ Straight-line depreciation is also available if you’d rather spread equal deductions across the recovery period to save them for higher-income years.

MACRS uses a half-year convention by default: every asset is treated as if placed in service at the year’s midpoint, and your first-year deduction is half the normal annual amount whether you bought in January or November. If more than 40% of your total equipment purchases for the year happen in the last quarter, the mid-quarter convention kicks in instead, which can shrink first-year deductions on late-year purchases.⁹

Farm Vehicles

Pickup trucks, flatbeds, and other farm vehicles follow separate rules based on weight. The dividing line is 6,000 pounds gross vehicle weight rating.

Vehicles over 6,000 pounds GVWR (most full-size pickups, heavy-duty trucks, large SUVs) qualify for the full Section 179 deduction with one caveat: certain SUVs face a separate cap. The statute sets a base SUV limit of $25,000, indexed for inflation, and for 2026 the cap is approximately $32,000.⁶ Vehicles not classified as SUVs, like pickup trucks with a full-size bed, aren’t subject to this cap. Any basis remaining after Section 179 can still be picked up by 100% bonus depreciation.

Lighter passenger vehicles (under 6,000 pounds GVWR) face the luxury automobile limits. For 2026, the first-year depreciation cap is $20,300 with bonus depreciation or $12,300 without.¹⁰ Those limits apply regardless of the vehicle’s actual cost.

Every vehicle deduction requires more than 50% business use. Keep a mileage log or GPS records. Drop below 50% in any year and you’ll face recapture on the excess deductions you already claimed.

Repairs You Don’t Have to Depreciate

Not everything runs through the depreciation system. Routine repairs and maintenance are deductible as ordinary business expenses in the year you pay them.¹¹ The line between repair and capital improvement comes down to whether the work makes the equipment better, restores it to like-new condition, or adapts it to a new use. Replacing worn brake pads is a repair. Rebuilding an engine to extend the truck’s useful life several years starts looking like a capital improvement that has to be depreciated.

Two safe harbors help with borderline items. The de minimis safe harbor lets you immediately expense purchases of $2,500 or less per item ($5,000 if you have audited financial statements), covering small tools, replacement parts, and minor equipment. The routine maintenance safe harbor covers activities you reasonably expect to perform more than once during the equipment’s class life (oil changes, filter replacements, seasonal tune-ups), which stay deductible as current expenses even when they add up.

When it’s close, err on the side of capitalizing. An audit that reclassifies a deducted repair as a capital improvement produces back taxes, interest, and possible penalties.

Trade-Ins and Sales: Recapture

When you sell farm equipment for more than its adjusted basis (original cost minus all depreciation claimed), the gain is taxed as ordinary income up to the total depreciation you previously deducted. This is depreciation recapture under Section 1245.¹² Expense a $300,000 combine under Section 179, later sell it for $120,000, and the entire $120,000 is ordinary income. Gain above the total depreciation claimed is Section 1231 gain, which may qualify for the lower long-term capital gains rate.

Before 2018, farmers routinely used like-kind exchanges under Section 1031 to trade old equipment for new without recognizing gain. The TCJA killed that option for personal property, including farm machinery. Only real property still qualifies for Section 1031.¹³ Every equipment trade-in is now a sale of the old machine plus a purchase of the new, with any gain recognized right away.

Budget for the tax hit. Trading in a fully depreciated tractor with a $0 basis for $40,000 in trade-in value creates $40,000 of ordinary income. Many farmers time the purchase so the Section 179 or bonus depreciation deduction on the new equipment exceeds the recapture on the old.

When the Deduction Exceeds Your Income

A large equipment write-off, especially from bonus depreciation, can push your farm into a net operating loss. Farming losses can be carried back two years, generating a refund of taxes you already paid in those earlier years.⁸ Any remaining loss carries forward indefinitely, and you can waive the carryback and carry the entire loss forward if that produces a better result.

Two limits are worth knowing. The two-year carryback applies only to the farming portion of your NOL, so if you have both farm and non-farm income, you calculate the farming loss separately. And a farming NOL carried back to years after 2020 can only offset up to 80% of taxable income in the carryback year. The refund won’t zero out an earlier year entirely, but it still arrives relatively quickly after filing an amended return or Form 1045.

One more thing to watch. The IRS looks hard at farming operations that report losses year after year. If your farm doesn’t show a profit in at least three out of five consecutive years, it may be reclassified as a hobby, and all business deductions disappear. For operations that primarily involve breeding, training, or racing horses, the test is two profitable years out of seven.¹⁴ You can rebut the presumption with evidence of genuine profit motive, but a pattern of large equipment write-offs producing perpetual losses will draw attention.

1
Internal Revenue Service. Notice 2026-11 – Interim Guidance on Additional First Year Depreciation Deduction
2
Internal Revenue Service. Instructions for Schedule F (Form 1040)
3
Internal Revenue Service. Publication 946 – How To Depreciate Property
4
Internal Revenue Service. Form 4562 – Depreciation and Amortization
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
7
eCFR. 26 CFR 1.179-3 – Carryover of Disallowed Deduction
8
Internal Revenue Service. Instructions for Form 172
9
eCFR. 26 CFR 1.168(d)-1 – Half-Year and Mid-Quarter Conventions
10
Internal Revenue Service. Rev. Proc. 2026-15 – Depreciation Limitations for Passenger Automobiles
11
Internal Revenue Service. Tangible Property Final Regulations
12
Office of the Law Revision Counsel. 26 USC 1245 – Gain From Dispositions of Certain Depreciable Property
13
Internal Revenue Service. Like-Kind Exchanges – Real Estate Tax Tips
14
Internal Revenue Service. Is Your Hobby a For-Profit Endeavor