Extension of 100% bonus depreciation could boost agricultural irrigation equipment sales

As Congress deliberates in 2025 over President Trump’s proposed “big, beautiful bill”—a sweeping tax reform package aimed at making the 2017 Tax Cuts and Jobs Act (TCJA) provisions permanent—one provision garnering significant attention is the potential extension of 100% bonus depreciation under Section 168(k). This provision allows businesses to immediately deduct the full cost of qualifying equipment in the year it is placed into service. For farmers and large-scale agricultural operations considering the purchase of center pivot systems, drip irrigation, pump equipment, smart controllers, and other ag machinery and equipment, this accelerated tax benefit can dramatically lower the effective cost of investment. 

The current target for passing new tax legislation, which could include extending 100% bonus depreciation, is July 4, 2025.  

If an extension for 100% bonus depreciation is passed in the summer of 2025, this has the potential to increase irrigation equipment orders in Q3 and Q4.  

Current Phase-Down of Bonus Depreciation 

Under the TCJA, 100% bonus depreciation was available for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. However, this provision is currently phasing down: 

• 2023: 80% 

• 2024: 60% 

• 2025: 40% 

• 2026: 20% 

• 2027 and beyond: 0%  

This gradual reduction diminishes the immediate tax benefits for equipment purchases, potentially impacting investment decisions in the agricultural sector. See the Iowa State University Center for Agriculture Law and Taxation article Expiring Tax Provisions Big Issue for 2025. 

How 100% bonus depreciation benefits farmers 

For example, a farmer purchasing a $100,000 irrigation system in 2025 would, under the current 40% bonus depreciation rate, be able to deduct $40,000 immediately. Assuming a 24% tax bracket, this results in a tax savings of $9,600. However, if 100% bonus depreciation were reinstated, the immediate deduction would be the full $100,000, leading to a tax savings of $24,000 — an additional $14,400 in savings. This immediate tax relief improves cash flow, allowing for reinvestment into farm operations or debt reduction. 

Legislative outlook and considerations 

The proposed extension of 100% bonus depreciation is part of a broader tax reform effort currently under consideration in Congress. The “big, beautiful bill” aims to solidify the tax cuts introduced in 2017, with discussions ongoing about the scope and funding of these provisions. While the House aims to pass the legislation by Memorial Day, the Senate has set a target date of July 4th. The reconciliation process being used allows for passage with a simple majority, bypassing the filibuster, but internal divisions within the Republican Party and debates over spending cuts and deficit impacts present challenges.  

Consultation with tax professionals advised 

Given the complexity of tax laws and the potential changes on the horizon, farmers and agricultural business owners are strongly encouraged to consult with their legal and tax advisors. Professional guidance can help navigate the nuances of depreciation provisions, ensure compliance with current regulations, and optimize tax strategies tailored to individual circumstances.