You may claim depreciation for certain items used in your farming business, but only if the property meets IRS requirements for depreciable business property. Depreciation is generally allowed for tangible property you own and use in your farm trade or business that has a determinable useful life of more than one year.
Depreciation is computed using Form 4562 (Depreciation and Amortization) and the applicable MACRS rules under IRC §§167 and 168.
Eligible Property for Depreciation
Depreciation is allowed for farm business property such as:
- Farm buildings and structural improvements (e.g., barns, sheds, storage facilities)
- Machinery and equipment (e.g., tractors, harvesters, irrigation systems)
- Vehicles used in farming operations (cars, trucks, and other transport used for business purposes)
- Land improvements (e.g., fencing, drainage, field roads)
- Other tangible property used in farming with a useful life greater than one year
Property Not Eligible for Depreciation
You generally cannot claim depreciation for:
- Land
- Inventory or livestock held for sale or resale
- Crops grown for sale
- Personal-use property (e.g., personal residence, personal furniture, personal vehicles not used in farming)
- Assets not placed in service in a trade or business
Section 179 Deduction and Bonus Depreciation
- You may elect to expense qualifying farm property under Section 179 (Form 4562), subject to annual dollar limits, taxable income limitations, and business-use requirements.
- Section 179 generally applies to tangible personal property used in farming and certain qualifying improvements.
- You may also be eligible for bonus depreciation under IRC §168(k) for qualifying property placed in service in the applicable tax year, subject to current statutory phase-down percentages.
Business Use Requirement
- Property must be used more than 50% in a farming trade or business to qualify for full depreciation benefits under MACRS and Section 179.
- If business use falls to 50% or less, special recapture rules apply and depreciation must be recomputed under Alternative Depreciation System (ADS).
Recapture Rules
If you claim depreciation or Section 179 deductions and later dispose of the property or reduce its business use:
- You may be required to recognize depreciation recapture as ordinary income under IRC §1245 or §1250
- Recapture applies to the excess of depreciation or Section 179 claimed over allowable straight-line depreciation
- Recapture is generally reported on Form 4797 (Sales of Business Property)
Depreciation on Disposition of Property
When depreciable farm property is sold or disposed of:
- Gain attributable to prior depreciation deductions is treated as ordinary income (recapture)
- Any remaining gain may be treated as capital gain, depending on the type of property
- Installment sales may still require recapture in the year of sale
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.