This is the fourth in a series of posts that examine how to calculate depreciation at the state level while accounting for differences with the federal section 179 deduction and bonus depreciation rules. Beginning in 2002 there have been several enhancements http://www.depreciationguru.com/category/bonus-depreciation/) to the tax code that allows increased Section 179 deductions and bonus depreciation on your company’s federal tax filing.
Many states calculate depreciation based on their own unique rules while others follow the federal regulations. Some states follow all the federal regulations and some follow most of the rules but disallow bonus depreciation. This can change from year to year so it is important to check the latest regulations.
Here is a link to the web site AccountingMajors.com that provides links to the department of revenue web site for all 50 states:
Although a small number of states made the decision to follow federal regulations with the bonus depreciation provision, the majority have chosen not to implement bonus depreciation. If a state chooses to completely follow federal regulations then it is much easier for corporations to file tax returns because of the consistency in dealing with depreciation.
So why would a state make the decision to not follow the new legislature? The main reason is that they are concerned with the loss in tax revenue. That means states that choose to “decouple” from the federal law will retain the rules from prior law and require bonus depreciation to be added back on their return. While this is a solution to address the loss in state tax revenue, it creates a complexity for taxpayers that now have to deal two sets of rules. This can be difficult for both the state and the taxpayer in the current year as well as creating audit issues in future years.
If you do business in multiple states then you already know how complex this can get to keep up with the regulations in each state. To save time and produce an accurate return it is definitely worth looking at an automated solution like Bassets eDepreciation.
Questions or comments about this post? We invite you to respond in the space below.
More information about Bassets eDepreciation software can be found at Bassets.net. While there you can set up a demonstration, download a free evaluation copy and get a personalized pricing estimate.