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Last Updated: 10/29/2018

Section 179 Expensing Addition

Section 179 expensing lets businesses deduct the entire cost of certain equipment on their  federal tax return in the year of purchase (instead of deducting depreciation over multiple years). Minnesota limits this expensing on your state return to the amount allowable in 2003, when the federal limits first increased. You may need to add back part of your federal deductions for section 179 expensing.

Do I need to make this addition?

If you claim federal section 179 expensing exceeding Minnesota’s limits, you must add back 80 percent of the difference on your state return for that year.

What are Minnesota’s limits on section 179 expensing?

Minnesota caps section 179 expensing at $25,000 in the year of purchase, with an investment limit of $200,000. The limits apply first at the entity level and then flow through to shareholders or partners. The limits also apply at the individual level. For more information, see Examples 1 and 2 below.

Example 1 — Sole Proprietor (for Minnesota residents and nonresidents)

Example 2 — Partnership (flow through to partners who are full-year Minnesota residents)

What is the amount of my addition?

If the cost of the asset is more than $200,000, then the addback on your Minnesota return is 80 percent of the federal amount.

For more information:

How do I report this addition?

Complete Schedule M1M, Income Additions and Subtractions. Include Schedule M1M when you file Form M1, Individual Income Tax.