Category Archives: Calculations

Limitation on Luxury Automobile Depreciation

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The IRS just issued the 2013 depreciation limitations for automobiles and trucks. You can see the full release here. The 2013 limits for passenger automobiles are the same as 2012 while the truck limits have increased.

Limitation on Luxury 2

IRS rules limit the amount of depreciation that may be deducted annually on a passenger automobile used for business. This depreciation limit may be found in automobile depreciation limitation tables published by the IRS annually in Publication 463:

http://www.irs.gov/pub/irs-pdf/p463.pdf

Pick-up trucks, SUVs and vans built on a truck chassis with a gross vehicle weight rating of less than 6,000 pounds use a different set of limitations. In 2012 the truck limits in the first year were $3,360 and $11,260 with bonus depreciation. Second year was $5,200, third year was $3,150 and all other years were $1,875. In 2013, these limits have increased by $100 in each year. If bonus depreciation is not elected, then you must use the lower limitation in the first year and the same limits for all subsequent years.

The above limitations all assume a 100% business use of the vehicle. If the vehicle is used more than 50%, but less than 100% then the amount must be reduced proportionally based on the percentage of business use. For example, if a car was used 80% of the time for business then all limits would be multiplied by .80 to calculate the appropriate limitation.

A program like Bassets eDepreciation will automatically calculate these limitations for you and ensure accurate compliance. Additionally we will research the annual tax law changes and confirm that the most current auto limitations are properly applied.

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.

View Monthly Detail Behind Depreciation Calculations

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There is often confusion with the monthly calculation of depreciation. The basic calculation is to first determine the annual depreciation for each year and then divide that by the number of periods in the year. This gets more complicated with different first year conventions and changes over the life of the asset.

Bassets eDepreciation features a Detail tab as part of the Asset Maintenance form. This provides the user with Year by Year and Month by Month detail with Annual and Cumulative Totals of the depreciation calculation for the selected Depreciation Schedule for the asset record displayed on the screen.

Pictured here is an example if $6,000 asset depreciated over 5 years with a double declining balance and half year convention.

View Monthly Detail

This calculation grid shows the numbers for each individual period for the entire life of the asset. Depreciation detail can help answer questions when they arise concerning adjustments, bonus depreciation, disposals, transfers or other event changes to an asset.

Monthly Calculations

In the top part of this form there is a data grid of rows (12 periods in a year with totals) and columns (each year in an assets life). Each of the “cells” represents the monthly depreciation calculation for a single period. The columns will begin with the year the asset is placed in service and continue through until the asset is fully depreciated.

Annual and Cumulative Totals

  • Annual represents the Yearly depreciation amount for each year.
  • Cumulative represents the Yearly cumulative depreciation for each year. The calculated amount is the Annual depreciation amount plus any previous cumulative amount.
  • Remaining represents the Yearly remaining balance of an asset. The calculated amount is the Cost value minus the Cumulative total.

As you can see, the ability to view the depreciation detail behind a calculation can be very helpful in answering questions. Instead of just looking at a single cumulative number, this let’s you easily view each period for the entire life of an asset.

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.

Case Study – Large Northwest Sports Retailer

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Trying to stay ahead of the curve on the fashion trends of young adults (12 – 24 years old) is a challenge for sure. Based in the northwest US, a major action sports retailer is continually expanding its number of retail stores across the country while also growing an internet business revolving around their customers. This retailer relies on accurate fixed asset tracking and depreciation calculations, so they sought a partner that shared their passion for customer support. When it was time to replace their older fixed asset software the project manager looked at all the leading solutions and selected Bassets eDepreciation.

“Sure, there are bigger software companies out there with capable products” according to Jasmine Perez, “but I always felt that from the start that Bassets genuinely cared about what my team needed from the product. The ability of our vendor to listen and respond were key differentiators when it came to decision time because I knew this was going to be a long-term relationship. Two years later I am very satisfied with our decision.”

For more information on this and other case studies please visit the Case Studies Page on our website.

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.

Determining Asset Property Class – Part 2

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Recently we put up a post on Determining Asset Property Class. It referenced IRS Publication 946 and the importance of choosing the correct property class. Today, we follow that up post by showing how Bassets eDepreciation can simplify this process.

Selecting the appropriate property class is a critical step in determining the correct annual depreciation amount. The property classes are listed in Appendix B of IRS Publication 946. A manual lookup of each class can be very time consuming during asset entry, so Bassets eDepreciation now includes a handy Asset Class form as shown below:

This feature provides an easy retrieval of the accurate IRS property class. As you scroll through the list of asset classes, the correct values for each class are shown below. These values include property type, listed property, class life years, bonus code and section 179. In addition, the years, depreciation method and first year convention are displayed for GDS, ADS and AMT.

Combining a property class lookup with the business rules logic of Bassets eDepreciation allows for intelligent data entry and consistency in all of your business assets.

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.

Calculating Depreciation with a Short Tax Year

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A short tax year is defined as one that is less than one year (12 months) in length. These can occur during mergers, when a business is first started or if there is a change to the method of accounting.

If a business wants to file on a calendar-year basis, but the business is started during the middle of the year, then they will need to account for the short tax year. The short year will be for the remaining months in the first year, so if the business begins in June, then the short year would be 7 months long. The same holds true for a business that uses a fiscal year and the short year is determined by the number of periods between the first month and the fiscal year end. So if the business again begins in June, but the fiscal year end is September then the short tax year would only be 4 months long.

Short tax years also occur during mergers and acquisitions when the two companies have different tax year ends. If the company being acquired has a different year end, then a short year can be used to change them to the same year end as the new parent company. Let’s say company A has a March year end and they acquire company B that files on a calendar-year basis. Company B could utilize a three month short year (Jan – Mar) to get in synch with company A.

Bassets eDepreciation is designed to handle one or more short tax years. This can occur if you had a short year when you started the business and then needed one or more in the future to account for a merger or accounting change.

Also note that there are specific rules to deal with calculations in a short year. The selected first year convention will impact the depreciation numbers in the first year of an asset’s life and also any disposals.

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.