Source: http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/deductions/business-related-deductions.html
Timestamp: 2017-06-25 05:29:42
Document Index: 682069154

Matched Legal Cases: ['§179', '§179', '§ 179', '§ 179', '§ 179', '§ 179', '§ 179', '§ 168', '§ 168', '§ 168', '§ 168', '§ 179', '§ 179', '§179', '§179', '§ 162']

Guide to Personal Income TaxBusiness Related Deductions
Business Related Deductions Federal Business Related Deductions AllowedSection 179 ExpensesDepreciationGambling ActivitiesPartnership and S Corporation DeductionsTrade or Business ExpensesMassachusetts Business Related Deductions AllowedAbandoned Building Renovation DeductionAllowable Excess Trade or Business DeductionNonresidents and Part-year ResidentsWhere to Report on Original Tax Return; What to EncloseDocumentation to Submit with Abatement/Amended Tax ReturnMassachusetts and Federal References Prior Law, History of Business Related Deductions Federal Business Related Deductions AllowedSection 179 ExpensesFor both the corporate excise and the personal income tax, Massachusetts follows the current Code for purposes of I.R.C. §179, which provides an election to expense certain depreciable business assets in its initial year (qualifying property, called Section 179 property) rather than treat them as capital expenditures.To the extent a taxpayer is eligible to deduct trade or business expenses in Massachusetts, the taxpayer is allowed a I.R.C. §179 deduction in the same amount as allowed federally.Tax Increase Prevention Act of 2014 (P.L. 113-295):Pursuant to the Tax Increase Prevention Act of 2014, the I.R.C. § 179 dollar limitations have been extended to tax year 2014; the election under I.R.C. § 179 to expense property in its initial year remains at $500,000, and the I.R.C. § 179 overall investment phase-out threshold remains at $2,000,000. The Act also extends the definition of I.R.C. § 179 property to include computer software and $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.Massachusetts adopts these changes because I.R.C. § 179 is a trade or business expense deduction, which is adopted by Massachusetts on a current Code basis.For tax years beginning after 2010, an election not made on an original return must be made on an amended return filed by the due date of the original return (including extensions) unless permission is obtained. Permission to revoke or change an election will also be required. DepreciationMassachusetts Depreciation Rules:for corporate excise purposes, the definition of net income does not include the new federal depreciation allowance available under I.R.C. § 168(k); andfor personal income tax purposes, Massachusetts Part B adjusted gross income also does not include the new federal depreciation allowance;these changes to both the corporate excise and the personal income tax are effective retroactively for taxable years ending after September 10, 2001.Return Filing Requirements:For Massachusetts purposes depreciation is to be claimed on all assets, regardless of when they are placed in service, using the method used for federal income tax purposes prior to the enactment of I.R.C. § 168(k).A Massachusetts taxpayer that claims bonus depreciation under I.R.C. § 168(k) for federal purposes must calculate a separate depreciation schedule for purposes of claiming depreciation on the Massachusetts corporate excise return or the Massachusetts personal income tax return. For the year property is placed in service and subsequent years, a taxpayer must calculate Massachusetts depreciation as if the taxpayer elected not to utilize the bonus depreciation allowance at I.R.C. § 168(k). Effect of Depreciation on Basis; Modifications to Gain or Loss in Year of Disposition Trade or Business ExpensesTo the extent a taxpayer is allowed to deduct trade or business expenses in Massachusetts, the amount of the Massachusetts deduction corresponds to the amount of the federal deduction. The following are examples of how certain trade or business expenses allowed for Massachusetts purposes will be updated to the current Code treatment:I.R.C. § 179 Expense;Nonresidential Real Property.Massachusetts adopts the federal treatment for Trade or Business expenses, under the Internal Revenue Code, as amended and in effect on January 1, 2005 and automatically adopts any future changes to the Federal provisions for these expenses.S Corporation shareholders, partners in partnerships, sole proprietors and landlords now get all of the same business expense deductions as they do for federal purposes.Massachusetts Business Related Deductions AllowedAbandoned Building Renovation Deduction Massachusetts law allows as a deduction an amount equal to 10% of the costs incurred in renovating qualifying abandoned buildings located in an Economic Opportunity Area (EOA). The buildings must be designated as abandoned by the Economic Assistance Coordinating Council. The renovation deduction may be taken in addition to any other deduction for which the renovation costs qualify. (For example, the depreciation deduction on improvements to property.)This deduction is available for personal income taxpayers (Schedule C or E) or for corporations whose tax liability is determined by net income.Qualifying Economic Opportunity Areas:For further information on qualifying EOAs, taxpayers should contact the Massachusetts Office of Business Development, 10 Park Plaza, Room 3730, Boston, MA 02116, 617-973-8600Allowable Excess Trade or Business Deduction The excess of allowable Form 1 or Form 1-NR/PY deductions over Form 1 or Form 1-NR/PY income may be deducted against other types of gross income that are effectively connected with the active conduct of a trade or business of the taxpayer.The excess deductions may be claimed in the following order:from Schedule B income before any other Schedule B allowable deductions; thenfrom Schedule D income after netting long-term gains and losses and after deducting excess short-term losses.Any remaining excess deductions are not allowed to be carried forward to subsequent tax years.Dividends are generally not considered income from the active conduct of a trade or business of the taxpayer.Where to Report on Original Tax Return; What to Enclose:Abandoned Building RenovationFor Personal Income, enter the deduction allowed on either Schedule C, Line 30 or Schedule E, Part I, II or III, Line 4;For Corporations, Massachusetts Schedule E - Taxable Income.Nonresidents and part-year residents may claim this deduction if the property is located in MassachusettsAllowable Excess Trade or BusinessMassachusetts Schedule C-2, Excess Deductions against Trade or Business Income.Documentation to Submit with Abatement/Amended Tax Return:Abandoned Building RenovationFor Personal Income, enter the deduction allowed on either Schedule C, Line 30 or Schedule E, Part I, II or III, Line 4;For Corporations, Massachusetts Schedule E - Taxable Income;Statement detailing the location and renovation cost of the qualifying abandoned building;Verification from Economic Coordinating Council that building is designated as abandoned.Allowable Excess Trade or BusinessCorrected Massachusetts Schedule C-2, Excess Deductions against Trade or Business Income;Corrected Massachusetts Schedule B, if applicable;Corrected Massachusetts Schedule D, if applicable.Massachusetts References: Abandoned Building RenovationM.G.L. Chapter 23A, Section 3BM.G.L. Chapter 62, Section 3(B)(a)(10)M.G.L. Chapter 63, Section 38OAllowable Excess Trade or BusinessM.G.L. Chapter 62, Sections 2(c)(1), (d); 2(e)(I)(2) as amended by St. 1999, c. 127, s. 67TIR 99-17: Capital Gains and Losses: Massachusetts Law Changes Retroactive to 1996, which modifies TIR 98- 8 and TIR 97-3Section 179 ExpensesM.G.L. Chapter 62, Sections 1(c) 6F(2), (3)Notice – Update to 2014 Personal Income Tax InstructionsTIR 03-25: Depreciable Business Assets; Modifications For Decoupling From Federal Bonus DepreciationTIR 98-8: Massachusetts 1998 Reducing Income Taxes Act (Trade or BusinessM.G.L. Chapter 62, Section 1(c), as amended by St. 1998, c. 175, ss. 6; 2(d)(1)TIR 05-16: The Effect of the Adoption of the Updated Internal Revenue Code on the Massachusetts Personal Income Tax (TIR 98-8: Massachusetts 1998 Reducing Income Taxes Act ("the Act")Federal References:179 ExpensesI.R.C. §§ 179, as amended by the Jobs and Growth Tax Relief Reconciliation Act of 2003, P.L. 108-27 (the 2003 Federal Act); as amended by The Federal Jobs and Growth tax package (P.L. 108-2); §179(b); §179(b)(1), as amended by the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28); 280FIRS Rev. Proc. 2005-70Trade or BusinessI.R.C. §§ 162(a); 179; 168(e)(2)(B); 1250 Complementary Content