Section 179 Depreciation of Citrus Trees

You may depreciate a citrus tree like this one if you use the tree in business operations.

The Internal Revenue Service allows taxpayers and homeowners to depreciate property used in business activities. If you operate a farm business, you may depreciate citrus trees when filing fiscal returns at the end of the year.

Depreciation Defined

Depreciating an economic resource means recovering the value of the resource over a set number of periods. When filing fiscal information, the IRS allows you to depreciate property that you use in business activities. Depreciation is financially advantageous because you do not pay for it, yet it lowers your tax liability.

Section 179 Depreciation

Section 179 of the Internal Revenue Code allows you to depreciate the entire value of an asset in the first year of operation. In a traditional depreciation process, you recover the cost of an asset gradually over several periods, say five years. Section 179 provides this incentive to encourage small businesses to buy operating equipment and machinery.

Illustration

For example, you buy a medium-sized farm that has citrus trees valued at $10,000. Under Section 179, you can depreciate the trees' entire value at the end of the year. In other words, you record a $10,000 depreciation expense in your statement of profit and loss.

References

• Internal Revenue Service: Farm Business Expenses - Capital vs. Reoccurring Costs
• Tax Guru: Section 179 Deduction