Kassidy Wagner

A New Year of Big Tax Opportunities

Montana farmers and ranchers are entering 2025 with two of the most valuable tax tools in agriculture back at their strongest. The One Big Beautiful Bill Act (OBBBA) restores 100% bonus depreciation and significantly raises Section 179 limits, allowing producers to expense much of their equipment, buildings, and farm improvements immediately. In an industry where capital investment is constant, this creates a significant planning advantage for the year ahead.

What OBBBA Changed

OBBBA permanently reinstates 100% bonus depreciation for qualifying assets and increases Section 179 expensing limits to roughly $2.5 million, with phase-outs beginning at roughly $4 million. While IRS guidance continues to roll out, the core rules are clear: bonus depreciation now allows a complete write-off with no cap, provided the asset is acquired or contracted after the January 2025 cutoff and placed in service during the year. Section 179, already a popular option for farms, expands even further, giving producers more room to expense targeted purchases. Together, these updates give Montana operations exceptional flexibility to reduce taxable income in 2025.

How Section 179 and Bonus Depreciation Differ

Though both provisions allow first-year deductions, Section 179 and bonus depreciation serve different purposes. Section 179 is elective and will enable producers to choose precisely which assets to expense and how much to deduct. It is capped at the annual limit and cannot be used to create or increase a farm loss, making it ideal for those who want to manage taxable income without eliminating it entirely.

Bonus depreciation is the opposite approach. It applies automatically unless you opt out and offers a full first-year deduction for qualifying property with no dollar limit. This makes it especially attractive for large equipment purchases, grain bins, irrigation pivots, and new agricultural buildings—investments that often exceed Section 179 limits. Many farms will use both tools together, applying Section 179 first and relying on bonus depreciation to finish expensing the remaining basis.

What This Means for Montana Farms

These expanded rules apply to a wide range of farm investments common throughout Montana, including tractors, combines, drills, grain-handling equipment, irrigation systems, livestock-working equipment, shop improvements, and certain farm buildings. Timing matters more than ever this year. Section 179 still depends on the placed-in-service date, while bonus depreciation adds the requirement that the asset be acquired or contracted after the OBBBA effective date. For producers planning winter or spring purchases, especially pivots, grain bins, and major machinery, documenting these dates will be essential to secure the full deduction.

A Montana Reality: Weather, Lead Times, and Delivery Delays

One unique challenge Montana producers face when using these tax tools is the practical timing of equipment delivery and construction completion. Long lead times for machinery, unpredictable freight schedules, and early winter weather can all delay when an asset is genuinely placed in service. A combine that arrives in December may not be “ready and available” for use if it cannot be tested or delivered to the field. Similarly, a grain bin or shop addition might be fully paid for but not operational if concrete work or electrical systems can’t be finished before freezing temperatures. For tax purposes, the IRS cares about readiness—not the invoice date. Planning around Montana’s seasonal realities is crucial so producers don’t miss the placed-in-service requirement for 2025.

Choosing the Best Strategy for Your Operation

Selecting between Section 179 and bonus depreciation depends on your farm’s financial goals. Section 179 is best when you want control—ideal for smoothing income, satisfying lender requirements, or avoiding a loss. Bonus depreciation is more useful when you expect higher income and want to eliminate it with large, upfront deductions. A combined approach often works well: use Section 179 intentionally on certain assets, then apply bonus depreciation to fully expense larger purchases.

For example, a central-Montana grain farm buying a $475,000 combine, a $350,000 grain bin, a $90,000 drill, and $65,000 in fencing and water improvements might use Section 179 selectively to match income while relying on bonus depreciation for the major machinery and storage projects. With careful planning, this strategy can substantially reduce taxable income for 2025 while maintaining flexibility for future years.

Key Takeaways for 2025

This year offers a powerful opportunity for Montana producers to invest in equipment, storage, irrigation, and infrastructure improvements. The combination of restored bonus depreciation and expanded Section 179 expensing enables you to capture large deductions upfront, improve cash flow, and shape your tax picture with greater precision than in recent years. Documentation—including purchase dates, contract dates, and placed-in-service dates—remains critical, and coordinating early with your accountant ensures you get the full benefit of these expanded rules. With thoughtful planning and attention to timing, 2025 is positioned to be an excellent year for capital improvements across Montana agriculture.