Agricultural Equipment Depreciation

The 200% DB Election: A Post-2017 Benefit for Farmers

Prior to 2018, farmers were required to use the 150% declining balance method for most farm property—a slower acceleration than the 200% DB method available to other businesses. The Tax Cuts and Jobs Act of 2017 eliminated this restriction for property placed in service after December 31, 2017, allowing farm operations to use the same double- declining balance schedule as manufacturers and contractors.

Under 200DB, a $280,000 combine harvester classified as 7-year MACRS property generates a first-year MACRS deduction of approximately $40,000. Adding 40% bonus depreciation in 2025 yields an additional $112,000 first-year deduction, bringing the combined total to $152,000 on a machine expected to last 15 to 20 field seasons. Farmers electing Section 179 can potentially expense the entire $280,000 in year one, subject to the annual dollar cap.

Irrigation Systems, Drainage Tile, and Extended Recovery Assets

Not all agricultural capital expenditures receive the favorable 5-to-7-year treatment. Underground drainage tile, irrigation pipelines, and certain permanent fencing are classified as 15-year land improvements—a longer recovery period than tractor and implement purchases. Grain bins are depreciable over 7 years as personal property, or 20 years if considered permanently attached to land.

Knowing these distinctions matters for Section 179 planning. A corn farmer spending $800,000 in a single year across a tractor, tile drainage system, combine header, grain bin, and irrigation pivot can elect Section 179 on all qualifying property—but tracking each asset in its correct class ensures proper compliance and avoids IRS reclassification risk that could trigger penalties and interest on understated tax.

Livestock and Breeding Stock Depreciation

Dairy cows and beef breeding cattle purchased for $1,500 to $3,000 per head are depreciable under MACRS over a 5-year recovery period. Horses used for breeding or draft purposes use a 7-year life. Because farm operations often acquire livestock in batches, group-asset accounting allows an entire herd cohort to be tracked as a single asset class rather than individually.

When animals die or are culled from the herd, the group method absorbs these retirements without triggering individual gain/loss recognition—a significant simplification for large livestock operations. The method requires consistency; once elected, a farm must continue using group-asset accounting for that animal class unless it requests IRS permission to change accounting methods under Rev. Proc. 2019-43.