Impact of the Section 179 tax deduction on machinery investment

Joleen C. Hadrich, Ryan Larsen, Frayne E. Olson

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)458-468
Number of pages11
JournalAgricultural Finance Review
Volume73
Issue number3
DOIs
StatePublished - Nov 4 2013

Keywords

  • Double hurdle
  • Machinery investment
  • Tax incentives

Fingerprint Dive into the research topics of 'Impact of the Section 179 tax deduction on machinery investment'. Together they form a unique fingerprint.

Cite this