Minnesota has conformed to the Federal Section 179 deduction. This deduction allows taxpayers to deduct the entire cost of certain property as an expense. This eliminates the addback under the former Minnesota law.
Under the previous Minnesota law, a taxpayer would have to addback a certain amount of their Federal section 179 expense. Generally, a taxpayer would have to addback 80% of the Federal 179 expense. This 80% addback would then be taken as a subtraction evenly over the next five years.
This law change is in effect beginning in 2020. This change is not retroactive to previous addbacks besides one very limited exception. The exception is for qualified property acquired in a like-kind exchange during years 2017, 2018 or 2019.
This Minnesota law change creates an important distinction between the accelerated depreciation options. The two Federal accelerated depreciation options are Section 179, and bonus depreciation. Federally, both options provide an immediate deduction for qualified property. Minnesota now allows an immediate expense under Section 179. However, Minnesota’s bonus depreciation law did not change. 80% of the cost of bonus depreciation is still added back for Minnesota purposes.
Please consult with your tax advisor regarding this change. We’d love the opportunity to talk to you. Contact Drew Wolf, CPA at firstname.lastname@example.org for more information.