You may claim depreciation for certain items related to your farm income, but only if they meet specific IRS criteria. Depreciation is allowed for property used in your farming business that is expected to last more than one year, such as buildings, improvements, cars and trucks, machinery, and other farm equipment of a permanent nature. However, you cannot deduct depreciation for personal items (like your home, furniture, or personal vehicles), land, livestock bought or raised for resale, or inventory.
Eligible Property for Depreciation
- Buildings and improvements used in farming operations.
- Vehicles (cars, trucks) used for farm business purposes.
- Machinery and equipment used in farming.
- Other permanent farm assets with a useful life exceeding one year.
Special Depreciation Allowances and Section 179 Deduction
- You may elect to claim a 100% special depreciation allowance for certain fruit and nut plants planted or grafted after January 19, 2025.
- A 40% special depreciation allowance is available for similar plants planted or grafted after 2024 and before January 20, 2025.
- You can also elect under Section 179 to deduct a portion of the cost of qualifying property purchased in 2025 for use in your farming business. This election is made on Form 4562.
Restrictions and Exceptions
- Not deductible: Depreciation on personal property (home, furniture), land, livestock for resale, or inventory.
- Recapture rules: If you take a Section 179 deduction and later use the property less than 50% in your farming business during its recovery period, you must recapture part of the deduction as income. This applies to listed property as well. Use Form 4797, Part IV, to calculate the recapture amount.
- Alternative Depreciation System (ADS): If you elect not to be subject to the business interest expense limitation (common for farming businesses), you must use ADS for property with a recovery period of 10 years or more. You also cannot claim the special depreciation allowance for such property.
Depreciation Recapture on Disposition
If you sell or dispose of depreciable farm property (Section 1245 or Section 1250 property) at a gain, part of the gain may be treated as ordinary income due to depreciation recapture. The amount recaptured is generally the greater of the depreciation allowed or allowable. For installment sales, recapture is taxed in the year of sale even if no payments are received.
Source:
Schedule F Instructions (2025)
Form 4562 Depreciation and Amortization
Publication 946: How to Depreciate Property
Disclaimer: Always verify details with current IRS forms, instructions, and your state’s Department of Revenue. For complex situations, consult a CPA or tax attorney.