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Impact of the Section 179 tax deduction on machinery investment

Author

Listed:
  • Joleen C. Hadrich
  • Ryan Larsen
  • Frayne E. Olson

Abstract

Purpose - – The purposes of this paper are to determine the financial, structural, and tax policy factors that influence the probability of buying machinery and the intensity of the machinery purchases on North Dakota farming operations. Design/methodology/approach - – A double hurdle model was used to estimate the two decisions: purchasing machinery and the intensity of the machinery purchase. Data were collected from the North Dakota Farm and Ranch Management Business Association Annual Summaries for 1993-2011. Findings - – Results demonstrated that the tax incentive provided by Section 179 deduction had the largest positive effect on machinery purchases when compared to operating profit margin, leverage ratio, producer type, and experience of the principal operator of the farm. Originality/value - – Section 179 deductions have changed substantially over the 19-year period studied and have not been analyzed in previous machinery investment work. This analysis puts a numerical value on the effect of Section 179 deductions over time and demonstrates the large effect tax incentives have on machinery purchase decisions and levels.

Suggested Citation

  • Joleen C. Hadrich & Ryan Larsen & Frayne E. Olson, 2013. "Impact of the Section 179 tax deduction on machinery investment," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 73(3), pages 458-468, November.
    • Handle: RePEc:eme:afrpps:v:73:y:2013:i:3:p:458-468
    DOI: 10.1108/AFR-07-2012-0035
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    Citations

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    Cited by:

    1. Kitchenko Olena & Kuchina Svitlana, 2020. "Decision making on the direction of investment in the development of separate parameters of agricultural equipment," Technology audit and production reserves, Socionet;Technology audit and production reserves, vol. 1(4(51)), pages 11-17.
    2. Bawa, Siraj G. & Williamson, James M., 2017. "Tax Reform and Farm Households," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266294, Agricultural and Applied Economics Association.
    3. Williamson, James M. & Bawa, Siraj G., 2018. "Estimated Effects of the Tax Cuts and Jobs Act on Farms and Farm Households," Economic Research Report 276226, United States Department of Agriculture, Economic Research Service.

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