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Section 179 Expensing Addition

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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).

The Tax Cuts and Jobs Act (TCJA) modified section 179 expensing. The TCJA expanded the list of qualified property, increased the maximum expensing amount to $1 million, and increased the investment phaseout threshold.

For property placed in service in a taxable year beginning before January 1, 2020, Minnesota retained an 80% addition to income in the first year and a 20% subtraction for the five years following the addback. Minnesota limited the portion of expensing on a state return to the difference of the amount allowable under federal law and the amount allowable in 2003.

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Reporting the Addition [+]

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

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

Minnesota Limits on Section 179 Expensing

For tax years prior to 2020, Minnesota limited 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 on entities also apply at the individual level. For details, see Examples 1 and 2 below.

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

Example 2 - Partnership Flow Through

Tax Year 2020 and After [+]

Tax Years 2017, 2018, and 2019 [+]

If you claimed federal section 179 expensing that exceeds Minnesota’s limits, you must make this addition on your Minnesota return for that year. You must add back 80% of the difference between the dollar limit allowed under the Internal Revenue Code (I.R.C.) and the dollar limit allowed under the I.R.C. as amended through December 31, 2003.

The state Section 179 addition is not required for property received as part of a transaction that qualified as a like-kind exchange under Section 1031 of the IRC, as amended through December 16, 2016, but not after (qualifying property).

Minnesota Limits on Section 179 Expensing

Minnesota limited 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 on entities also apply at the individual level. For details, see Examples 1 and 2 below.

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

Example 2 - Partnership Flow Through

For more information:

Contact Info

Email

Contact form

Phone [+]

Questions

651-296-3781
800-652-9094

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Address [+]

Mail your income tax return to:

Minnesota Department of Revenue
Mail Station 0010
600 N. Robert Street
St. Paul, MN 55145-0010

Mail your property tax refund return to :

Minnesota Department of Revenue
Mail Station 0020
600 N. Robert Street
St. Paul, MN 55145-0020

Mail your tax questions to:

Minnesota Department of Revenue
Mail Station 5510
600 N. Robert Street
St. Paul, MN 55146-5510

Street address (for deliveries):
Minnesota Department of Revenue
Individual Income Tax
600 North Robert Street
St. Paul, MN 55101

Returns and payments may be placed in the night deposit box located in front of our building.

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Last Updated

December 29, 2021