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Qualifying Property

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To qualify for a Section 179 deduction, the property purchased must be one of the following types of depreciable property:
  • Tangible personal property (or any property that is not real property), such as:
    • Machinery, equipment, property contained in or attached to a building (refrigerators, office equipment, or signs), livestock, cattle, hogs, sheep, goats, horses, and furbearing animals. 
  • Other tangible property used as an integral part of manufacturing, production, or extraction (but, not the buildings or their structural components),
    • Or a facility used in connection with any of these activities for the bulk storage of fungible commodities (i.e., grain bins).
  • Single purpose agricultural (livestock) or horticultural structures. Which are buildings or enclosures designed, constructed, and used to:
    • House, raise, or feed a particular type of livestock AND will house the equipment needed to do so, 
    • Breed chickens or hogs, produce milk from cattle, or house feeder cattle, pigs, or broiler chickens AND will house the equipment needed to do so, or
    • A greenhouse for the commercial production of plants or mushrooms.
  • Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.
  • Off-the-shelf computer software.
  • Business vehicles in excess of 6,000 lbs. 
  • Agricultural fences and field drainage tile. 

To qualify for a Section 179 deduction the property must meet the following criteria:
  • Acquired by purchase (gifts and inherited property do not qualify for the deduction), 
  • Put into use in the preceding tax year, 
  • Purchased for use in your trade or business,
    • Partial business use is permitted, but the deduction will reduced to the percentage of time you use the equipment for a business purpose.
    • The deduction is only available for partial business use if you use the property more than 50% for business in the year you place it in service.
  • Not purchased from a related person, which is specifically defined as your spouse, ancestor, or lineal descendant. Parents are considered related, but siblings are not.

Used equipment qualifies for a Section 179 deduction, but does not qualify for the bonus depreciation deduction.  

 
The following property DOES NOT qualify for a Section 179 deduction: 
  • Land and improvements (such as, nonagricultural fences, swimming pools, paved parking areas, docks and bridges),
  • Property acquired for the production of income (investment property, rental property, and property that produces royalties),
  • Air conditioning and heating equipment,
  • Property used outside of the United States, 
  • Property that is used to furnish lodging, 
  • Property leased to others,
  • Property used predominantly for lodging or in connection with the furnishing of lodging,
  • Property used by a tax-exempt organization (except farmers’ cooperatives), unless the property is used mainly in a taxable unrelated trade or business, and 
  • Property used by governmental units. 
Any business that purchases less than $2 million of new or used equipment during a tax year will likely qualify for a Section 179 deduction. If your purchases exceed the $2 million threshold, the Section 179 deduction will decrease proportional to the excess amount.  However, you will still be able to elect the 50% Bonus Deprecation deduction for certain purchases.
 
Note that if your business is not profitable, or has no taxable income to use the deduction, you can elect to use the 50% Bonus Depreciation and it will carry-forward to a year when the business is profitable.