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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 phase-out threshold.
Minnesota retains an 80% addition to income in the first year and a 20% subtraction for the five years following the addback. You may need to add back part of your federal deductions for section 179 expensing. Minnesota limits a portion of expensing on a state return to the difference of the amount currently allowable under federal law and the amount allowable in 2003.
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If you claim 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 current Internal Revenue Code (I.R.C.) and the dollar limit allowed under the I.R.C. as amended through December 31, 2003.
What are Minnesota’s limits on section 179 expensing?
Minnesota limits 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.
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:
