CONGRESS EXPANDING SECTION 179 TAX BREAK

A bipartisan agreement between leaders of the House and Senate tax-writing committees would raise limits on the Section 179 expensing provision that is popular with farmers. The agreement also would restore a bonus depreciation provision to 100%. Both provisions are used by farmers to reduce the cost of equipment and machinery. Under the Tax Cuts and Jobs Act, passed in 2017, the bonus depreciation provision that allows a business to immediately write off the cost of equipment or buildings dropped from 100% to 80% of the purchase price in 2023 and is scheduled to fall to 60% this year, 40% in 2025 and 20% in 2026 before ending in 2027. The agreement would restore the provision to 100% through 2025, aligning it with the expiration of several other TCJA provisions, including an expanded estate tax exemption and the Section 199A 20% deduction on pass-through business income.

The Section 179 expensing allowance allowed businesses to write off up to $1.16 million of the cost of equipment and software for 2023, with the limit phased down dollar for dollar as spending exceeds $2.9 million. The agreement would raise the expensing limit to $1.29 million and increase the phaseout threshold to $3.22 million, with both indexed to inflation. Section 179, which can be combined with bonus depreciation, was made permanent under the TCJA. 

The congressional agreement includes an expansion of the child tax credit. Under current law, the maximum refundable credit was capped at $1,600 per child for 2023. The limit would rise to $1,800 for 2023 and then go to $1,900 for 2024 and $2,000 for 2025, along with an inflation adjustment for both those years.