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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 [+]

The Minnesota addition is not required for federal expensing claimed on business property that qualifies for federal and state Section 179 expensing. This applies to property placed in service after December 31, 2019.

Minnesota subtractions from prior-year additions will continue until the five-year subtraction period ends.

You must report a Minnesota Section 179 addition on the 2020 Minnesota income tax return in these circumstances:

Shareholders and partners of a fiscal-year flow-through business
- The Minnesota Section 179 addition applies to property placed in service during a flow-through business’s 2019 fiscal year.
- While a flow-through business’s 2019 fiscal year began before January 1, 2020, its partners and shareholders filing on a calendar year must report that income on their 2020 income tax return.
- Partners and shareholders must report the Minnesota Section 179 addition on their 2020 Minnesota income tax return that was generated by and flows through from a fiscal-year flow-through business’s 2019 Minnesota income tax return.

Taxpayers with a carryover of federal Section 179 expensing limited in a prior year
- Taxpayers whose federal Section 179 expense deduction is limited in the year the property is placed in service can carry the expense deduction to future years.

You must also report this addition for 2020, and potentially subsequent years, if both of these apply:

You elected federal Section 179 expensing for property placed in service in a tax year that began prior to January 1, 2020

You reported a federal carryover amount on income tax returns for tax years beginning after December 31, 2019

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

Hours [+]

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

June 08, 2021