Matching equipment payments to seasonal income without overpaying taxes

Key Takeaways:
  • Equipment financing and Section 179 can work together to help farmers acquire needed machinery without straining cash flow, allowing deductions up front while payments are spread over time.
  • Section 179 only applies when equipment is placed into service before year-end, and financed purchases often still qualify, but using the full deduction in one year can create heavier tax burdens in future years.
  • The biggest pitfalls come from rushing purchases for a “write‑off,” misunderstanding the differences between Section 179 and bonus depreciation, or waiting too late in the year for delivery, making proactive planning important.

 

If you run a farm operation, you already know the drill: equipment keeps you moving, but the price tags seldom align with market volatility or seasonal cash flow. One year you are staring at a combine that “still runs” but breaks down at the worst times. The next year you are looking at a tractor with 9,000 hours and thinking, if it goes down during planting, I’m in trouble.

And somewhere in the middle of that, you’re also thinking:

  • “We need this equipment, but can we afford the cash hit?”
  • “Should I finance it, or will interest costs outweigh the benefit?”
  • “If I finance it, can I still write it off?”
  • “How do I avoid buying equipment just to avoid taxes?”

When used intentionally, not as a last‑minute reaction, equipment financing and Section 179 can work together to help producers secure needed machinery while managing both cash flow and taxes.

This isn’t a “tax hack.” It’s understanding how the rules actually work, so you can make a decision that fits your operation.

The real problem isn’t equipment. It’s timing, cash and taxes all hitting at once.

Most agribusinesses aren’t short on good ideas.  What you often lack is timing flexibility, the clean window needed to make a major capital purchase. You’re balancing:

  • seed, feed, fertilizer, fuel, labor
  • a year that might be profitable on paper but tight in the checking account
  • lenders who want the numbers, the plan and your firstborn
  • and a tax bill that shows up right when you’d rather be focusing on the next season

So, when people talk about buying equipment “for the write-off,” what they usually mean is:

“We made good money this year, and I’d rather not give more of it to the IRS, but I also don’t want to empty my bank account just to save on taxes,

That’s a reasonable way to think. You just need the right playbook.

What Section 179 Actually Does

Section 179 lets you deduct the cost of qualifying equipment in the year you put it to work. Instead of writing it off over several years, you may be able to take a big chunk (sometimes all) up front as long as it’s placed into service by year-end.

A few examples of what often qualifies:

  • tractors, combines, planters, sprayers, skid steers
  • grain handling equipment
  • certain farm-use vehicles
  • technology and software you actually use in the business

If you had a strong year, that deduction can reduce your taxable income fast.

But here’s the part that matters: You do not get Section 179 because you ordered the equipment. You get it because you put it to work. If it’s sitting in a shed waiting on parts, or it doesn’t show up until after the new year, that “write-off” may not land where you thought it would.

“If I finance it, can I still write it off?” Yes—most of the time.

This is the biggest misconception out there. A lot of folks assume: “If I didn’t pay cash, I can’t deduct it.”

Not true in many cases.

Section 179 generally requires you to purchase the equipment (not lease it in a way that’s treated like rent). Many financed purchases still count as purchases for tax purposes. Lease terms can vary a lot so do not assume “lease” and “finance” are the same thing.

When financing is structured as a purchase, you can often:

  • take the deduction up front (when it’s placed into service)
  • spread the payments out over time
  • keep working capital for the stuff that keeps the farm alive day-to-day

That combination is why farmers like this strategy. You are not trying to “beat the system.” You are trying to keep the operation liquid while still using the tax rules correctly.

Deduction Now, Payments Later

You can reduce this year’s tax bill while keeping cash available for operating needs. That matters because on most farms, cash flow isn’t a smooth monthly paycheck. It’s seasonal.

Financing helps you:

  • match payments to when money actually comes in
  • avoid depleting your reserves right before input season
  • keep flexibility if the year turns sideways

And Section 179 can help you:

  • cut taxable income in a profitable year
  • reduce what you owe federally (and often at the state level too, depending on your state’s rules)

Common Mistakes Farmers Make with Section 179 and Financing

  • Buying equipment mainly because “we need a write-off”

That’s how you end up with a piece of equipment that’s “nice to have” and a payment you feel every month. A write-off doesn’t make bad math good.

  • Forgetting the future years

If you burn the whole deduction this year, don’t be surprised when next year’s taxes look rough, especially if you’re still making payments.

  • Treating bonus depreciation and Section 179 like they’re identical

They overlap but operate differently. Entity type, income levels and state rules can all influence which approach is better.

  • Waiting until December and hoping the dealership can perform miracles

Sometimes you get lucky. Sometimes you may not. And the IRS doesn’t care that delivery was late.

Before you sign anything, ask yourself these three questions:

  1. Do we actually need this machine, or are we trying to buy a tax problem away?
  2. What does our income look like this year and what do we expect next year?
  3. If we take the full deduction now, are we okay with what taxes might look like in future years while we are still making payments?

If you can answer those honestly, you are already ahead of most people.

Equipment financing and Section 179 can be a strong one-two punch:

  • you get equipment working when you need it
  • you keep cash available for operations
  • and you can reduce taxes in a profitable year

But it’s not a one-size-fits-all move, and it’s definitely not something you want to decide under pressure.

If you are thinking about buying equipment this year (new or used), do not wait until you are staring at the tax return and wishing you’d done something different. Even a quick conversation with the person who knows your numbers can keep you from making a rushed decision you will pay for (literally) for the next five years.

Farmers with questions about their specific situation, please reach out to Adams Brown’s agriculture team.