Most farmers know the benefits of the Section 179 deduction. The deduction has been as high as $500,000, is $139,000 for 2012 and is scheduled to drop back to $25,000 in 2013.
What many farmers do not know about is the ability to go back and amend their tax return to change their Section 179 deduction. The reasons for doing this are many:
- The farmer may be selling a piece of equipment this year that they took Section 179 on which creates a fully taxable sale. They can go back and amend the return to take no Section 179 on this equipment and substitute another piece that will not be sold.
- The farmer may have a Section 179 carryover that becomes too large on the current year tax return or future return. In some cases, the farmer will loss part or all of this deduction entirely unless they amend prior year's returns to reduce the Section 179 deduction amount. This can happen when the farmer has multiple investments in other partnerships and S corporations and the flow-through from those entities may be more than desired in conjunction with their current Schedule F Section 179 deduction.
- They may want to increase or decrease the deduction in prior years.
- They may find that other items of income or deduction were missed on the original return and changing the Section 179 deduction amount will keep their tax liability the same (if desired).
Under current law, this amendment is only available for assets placed in service before January 1, 2013. For 2013, once you make the Section 179 election it is irrevocable (unless Congress extends the law). You generally have three years from the due date of your return to make the amended election.
If rates dramatically increase next year, it may be wise to amend your Section 179 deduction for prior years to bring some of that deduction forward into 2013 and beyond. Check it out with your tax advisor.