Should You Buy Equipment to Lower Your 2026 Farm Tax Bill?
By Cassidy Walter Published on October 5, 2026
With harvest underway and minds turning to year-end planning, one expert offers a word of caution about big new expenses.
“We may have farmers that are going to have some reasonably good farm income this year due to better prices and substantial ARC/PLC payments across most of the Midwest,” said Barry Ward, director of Ohio State University’s Income Tax School.
Ward explained that typically, when farmers realize they have cash coming their way, the first reaction is to buy something they can expense to reduce their taxable income. But he advised them to consider cash flow needs for 2027.
“We’ve had an erosion of working capital … in the crop sector, over the past three or four years, and we’ve got a [likely] more challenging year, in terms of profitability, coming up,” he said. “I think that’s at least the outlook that we have right now: that the margin environment is going to be tougher even with some higher prices, because we don’t know yet what this fuel and fertilizer picture is going to look like. It doesn’t look good at this point.”
Expensing Business Purchases
However, if you do have your eye on expensing business purchases, Ward explained the three options farmers must consider, and some changes from the One Big Beautiful Bill Act signed into law in 2025.
MACRS Depreciation
With Modified Accelerated Cost Recovery System (MACRS) depreciation, the cost of business expenses, such as new equipment, can be recouped over multiple years on a schedule.
Ward said this can be helpful in low-income years, when farmers don’t need to account for as much income and can spread that expense out.
Section 179 Expensing
Section 179 is the tax law provision allowing farmers to expense the total or partial cost of a business purchase at once to reduce taxable income. The One Big Beautiful Bill Act permanently increased the limit to $2.5 million per year, and it is indexed with inflation.
Bonus Depreciation
If you are looking to expense more than $2.5 million, there is also additional first-year depreciation, also known as bonus depreciation. Ward explained this allows farmers to expense 100% of the value of the expense all at once, similar to Section 179. But he said there are key differences between the two, including you cannot partially write something off with bonus depreciation.
“Plus, any other equipment in that depreciation class also has to be taken at 100% bonus,” he said. “So everything purchased within a given asset class, if you take one thing at 100% bonus, you have to take them all.”
He added: “Section 179 is much more flexible, and $2.5 million will oftentimes capture most of what most farmers want to do. It just allows you to take only one piece of equipment and expense it, or part of one piece of equipment, depending on what your needs are to offset net farm income.”
The One Big Beautiful Bill Act made 100% bonus depreciation permanent. An Albany, New York-based law firm, Whiteman, Osterman, and Hanna, explained in an article that bonus depreciation was previously set up with a phase-down schedule.
“For years, businesses have enjoyed the benefits of bonus depreciation, which allowed for an accelerated write-off of qualified property,” said the firm in the article. “However, this benefit was always subject to a looming ‘phase-down’ schedule, gradually decreasing the applicable rate until it reached zero. The uncertainty surrounding its future made long-term capital expenditure planning challenging.”
