How Much Does Section 179 Cost the Government?

• October 9, 2015
• Paul Neiffer

The Congressional Research Service (a department of the Library of Congress) issues many reports regarding various subjects.  They just issued a report on Tax Extenders.  The report listed each of the tax extender provisions and the cost to the government over a ten-year period (everything is scored over a ten-year period in Congress).  I thought I would recap some of the costs associated with many of the provisions that farmers are either most familiar with or use each year in calculating their taxes.

• Section 179 costs about $348 million per year or $3.48 billion over 10 years
• 50% bonus depreciation costs about $304 million per year or $3.04 billion over 10 years
• Reduction in Built-in Gains period for S corporations costs about $42 million per year
• Exclusion of 100% of gain on certain small business stock costs about $317 million per year
• Deduction of sales taxes costs about $670 million per year or almost twice Section 179
• Tax Credit for Research and Experimentation Expenses costs about $2.262 billion each year of $22.62 billion over 10 years
• Incentives for Biodiesel and Renewable Diesel costs about $247 per year or $2.47 billion over 10 years

There are many other expiring provisions and if you add them all up the total cost to US taxpayers is about $97 billion over 10 years or slightly less than $10 billion per year.  This is likely one of the reasons why Section 179 may be made permanent at $1 million in any tax reform since is the scheme of things it does not cost that much and they can easily find an offset (although assuming Congress can easily do anything is likely a stretch).

Paul Neiffer, CPA

 

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