1. ​​​​​​​​What is the maximum section 179 expense deduction allowable?
   
   
2. May a taxpayer file a Wisconsin franchise or income tax return which reflects a section 179 expense deduction amount different than the amount claimed on the federal return due to a different election?
   
   
3. For federal income tax purposes, a taxpayer claimed bonus depreciation. Since bonus depreciation is not allowed for Wisconsin purposes, may a section 179 expense deduction be claimed instead?
   
   
4. What is the section 179 expense deduction for farmers?

1. What is the maximum section 179 expense deduction allowable?
   
   

   Generally, under section 179 tax provisions, persons may elect to deduct the cost of certain property used in a trade or business in the year placed in service instead of claiming depreciation. Wisconsin follows the same maximum dollar and business income limitations allowed for federal tax purposes. However, those limitations are calculated using the IRC in effect for Wisconsin purposes, as defined in secs. 71.01(6), 71.22(4) and (4m), 71.26(2)(b), and 71.98, Wis. Stats.
   

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2. May a taxpayer file a Wisconsin franchise or income tax return which reflects a section 179 expense deduction amount different than the amount claimed on the federal return due to a different election?
   
   

   Yes, a Wisconsin section 179 expense election may differ from the federal section 179 expense election. The Wisconsin election is subject to the same federal dollar and business income limitations calculated using the IRC in effect for Wisconsin purposes, as defined in secs. 71.01(6), 71.22(4) and (4m), 71.26(2)(b), and 71.98, Wis. Stats.

   Note: This does not apply to insurance companies. An insurance company must claim the same section 179 expense deduction for Wisconsin purposes as claimed for federal purposes according to sec. 71.49(2), Wis. Stats.

   Example: A taxpayer purchased $200,000 of section 179 qualifying assets but for federal purposes elected to expense only $50,000 of the assets cost. After the $50,000 section 179 expense deduction the business income reported on the taxpayer’s federal return is $120,000.

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   For Wisconsin purposes, the taxpayer elects to expense the entire cost of the section 179 property but is limited to business income calculated for Wisconsin purposes. There are no other differences between federal and Wisconsin business income. Therefore, the business income limit for Wisconsin purposes is $170,000. The taxpayer’s section 179 expense election reduces the Wisconsin taxable income in the current year to $0 and results in a $30,000 section 179 expense carryforward.

3. For federal income tax purposes, a taxpayer claimed bonus depreciation. Since bonus depreciation is not allowed for Wisconsin purposes, may a section 179 expense deduction be claimed instead?
   
   

   Yes, the section 179 asset expensing deduction operates independently of, and is claimed prior to, any section 168(k) first-year bonus depreciation deduction.

   Example: A taxpayer claims no federal section 179 expense deduction but elects a $16,000 bonus depreciation deduction and as a result, the federal return reflects $0 taxable income. For Wisconsin purposes, the $16,000 bonus depreciation deduction is not allowed, so it is added back to the federal taxable income. If there are no other differences between federal and Wisconsin taxable income, the federal taxable income for Wisconsin purposes before considering the section 179 expense deduction is $16,000. After electing to expense $16,000 under section 179, the federal taxable income for Wisconsin purposes is $0.

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4. What is the section 179 expense deduction for farmers?
   
   

   Wisconsin follows the maximum expense deduction and phase-out thresholds as allowed for federal tax purposes.

Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations enacted as of October 22, 2024: secs. 71.01, 71.22, 71.26, 71.49, and ​71.98, ​​​Wis. Stats and secs. 168 and 179, ​ ​IRC.

Laws enacted and in effect after this date, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to this date, that is contrary to the information in this document is superseded by this document, according to sec. 73.16(2)(a), Wis. Stats.

The department welcomes your input on our guidance. Submit comments on this guidance document.

Guidance Document Number: 100207

October 22, 2024​​