Published: October 10, 2026
Updated: October 10, 2026
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If you farm, run a landscaping crew or own a small contracting business in Ohio or Indiana, the last few months of the year are when the tax question comes up: should you buy that tractor, skid steer or compact track loader now, or wait until spring? Two federal rules, Section 179 and bonus depreciation, are the reason the timing matters. Here is how they work for 2026, in plain language, and what to ask your tax professional before you sign.
This article is general information, not tax advice. Every operation is different. Talk with your CPA or tax preparer before making a purchase decision based on taxes.
The Short Answer for 2026
- Section 179 limit: up to $2,560,000 of qualifying equipment can be expensed for tax years beginning in 2026.
- Phase-out: that limit starts shrinking dollar for dollar once you place more than $4,090,000 of qualifying property in service during the year.
- Bonus depreciation: 100% for qualifying property acquired after January 19, 2025, and it is now permanent rather than phasing down.
- The deadline that matters: the machine has to be placed in service by the end of your tax year. For most farms and small businesses that is December 31.
Those limits come from the IRS's annual inflation adjustments (Revenue Procedure 2025-32) and the 2025 federal tax law that restored full bonus depreciation.
What Section 179 Does
Normally, a machine you buy for your business is written off a piece at a time over several years. Section 179 lets you elect to deduct the full cost of qualifying equipment in the year you put it to work, instead of spreading it out.
It generally applies to new and used machinery and equipment used more than half the time for business. On a farm or job site that covers most of what we sell: farm tractors, compact utility tractors, combines and harvesting equipment, planters, sprayers, hay tools, skid steers, compact track loaders, compact excavators, commercial mowers and attachments.
Two limits to know:
- Business income limit. The Section 179 deduction cannot be larger than your taxable income from the active business. Any amount you cannot use carries forward to future years.
- Business use. If a machine is used for business less than half the time, it does not qualify, and if business use drops below half in a later year, part of the deduction can be recaptured.
How Bonus Depreciation Fits In
Bonus depreciation is a second, separate tool. For qualifying property acquired after January 19, 2025, it allows 100% of the cost to be deducted in the first year. Unlike Section 179, it is not capped by your business income, so in a year with lower income it can create a loss that may carry to other years.
Used equipment can qualify for bonus depreciation as long as it is new to you. That matters if you are shopping our used inventory. Many operations use Section 179 first, then bonus depreciation on the rest, but which one your preparer uses depends on your income, your entity and your plans for the next few years.
A Simple Example
Say a contractor buys a $90,000 compact track loader in November and has it working on a job before December 31. If their tax professional confirms it qualifies and the business has the income to use it, the full $90,000 could be deducted for 2026 instead of over several years.
At a 22% federal bracket, that is roughly $19,800 less federal income tax for 2026. The deduction is not extra money; it is a deduction you would have taken eventually, pulled forward into this year. It also means less depreciation to deduct in later years, which is why the right answer depends on whether you expect higher or lower income ahead.
Placed in Service Means Delivered and Working
This is the rule that trips people up in December. Ordering a machine, signing a purchase agreement or putting down a deposit does not count. The equipment generally has to be delivered and ready for use in your operation by the end of the tax year.
That makes timing practical, not just financial:
- Factory orders take time. A machine ordered now may not arrive by year-end. Ask about delivery dates before you count on the deduction.
- In-stock and used units move faster. If the deduction is the reason to buy this year, a unit already on the lot is the safer bet. Browse new John Deere equipment and used equipment to see what is available now.
- Get the paperwork right. Keep the bill of sale and a delivery record showing the date the machine went to work.
Financing and Section 179
You do not have to pay cash to take the deduction. Equipment bought with a loan or installment contract generally qualifies for the full cost in the year it is placed in service, even though the payments are spread over time. That is why many buyers pair a year-end purchase with financing: the deduction comes this year, and the payments come over the term.
A true lease is different. Lease payments are usually deducted as a business expense instead, and the equipment generally is not eligible for Section 179 for the person leasing it. Ask your preparer which structure fits before you choose. Current John Deere Financial programs are on our John Deere Financial page, and rates change during the year, so check the current offers before you decide.
Trade-Ins Can Create Taxable Income
Since 2018, trading in a machine is treated as a sale for federal tax purposes. If your trade-in has been fully depreciated, its trade value can show up as taxable income in the year of the trade. The new purchase deduction often offsets it, but it is worth running the numbers with your preparer, especially if you are trading in several pieces at once.
Ohio and Indiana Returns Are Different
Federal rules are only half the picture. Ohio and Indiana do not fully follow the federal bonus depreciation and higher Section 179 limits on the state return. Both states require an add-back, with the difference recovered through deductions in later years. The result is that your state tax benefit is usually smaller and slower than the federal one. Your preparer will know how it applies to your return.
Questions to Bring to Your Tax Professional
- What is my expected taxable income for 2026, and is Section 179, bonus depreciation or regular depreciation the best fit?
- Will pulling the deduction into this year leave me short of deductions in a higher-income year ahead?
- How will a trade-in affect my income this year?
- How do the Ohio or Indiana add-backs change the math on my state return?
- Does buying, financing or leasing make the most sense for my operation?
Plan Your Year-End Purchase With Us
If you are weighing a purchase before December 31, start the conversation early so there is time to find the right machine and get it delivered. Our sales team can tell you what is in stock, how fast it can be delivered and which financing programs apply, so you can bring real numbers to your tax professional. Explore compact utility tractors, farm tractors, skid steers and compact track loaders, or stop by one of our stores.
Koenig Equipment does not provide tax, legal or accounting advice. This article summarizes federal rules as published by the IRS for 2026 and is not a substitute for advice from a qualified tax professional.