The Minnesota Legislature recently passed a limited bill that included an important tax change for businesses. This important change is related to IRC section 179. Under this legislation, Minnesota’s section 179 expense will be in conformity with the IRS section 179 expense.
Prior to this limited bill, Minnesota only allowed $25,000 of section 179 for Minnesota tax purposes. This meant taxpayers would have additional income to recognize for Minnesota tax purposes for the amount of section 179 expense deducted federally that was above the $25,000 allowed by Minnesota. However, with this new bill, the amount of section 179 expense allowed for federal purposes will equal the section 179 expense allowed for Minnesota tax purposes.
This section 179 change for Minnesota income tax purposes is effective for tax years beginning in 2020. Thus, in 2020, the federal section 179 deduction allowed is $1,040,0000, which will also be section 179 deduction allowed for Minnesota income tax purposes. This means for both federal and Minnesota tax purposes, if a Minnesota taxpayer places section 179 eligible property into service by the end of 2020, he/she will benefit at both the federal level and Minnesota level; however, section 179 expense cannot bring a taxpayer’s taxable income below zero.
This information can be confusing or need more detail. Contact Dana Lee of SDK’s tax department or your SDK representative for more information.