Minnesota passed a bipartisan tax and bonding bill recently that included full conformity for all Section 179 expensing for tax years beginning in 2020. Additionally, the bill included retroactive Section 179 conformity to 2018 for assets acquired in a like-kind exchange.
The federal limit for Section 179 in 2020 is $1,040,000. The conformity bill means that the same $1,040,000 limit will apply to taxpayers’ 2020 MN returns. For both federal and state purposes, phaseouts of the expensing amount on 2020 additions occur when qualifying assets are more than $2,590,000.
Other than the limited retroactive conformity provisions for assets acquired in a like-kind exchange, if Section 179 was taken in previous years, Minnesota taxpayers should continue to utilize the five-year subtractions until taken fully.
Minnesota businesses can take advantage of Section 179 expensing beginning with tax years starting in 2020 and may benefit from taking Section 179 instead of bonus depreciation. Federal bonus depreciation continues to be limited to 20% for Minnesota purposes in the year of purchase with a five year recovery of the remaining balance.
For more information on Minnesota tax changes, contact your Smith Schafer professional at [email protected].
