Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 302 - Determination of Net Income › Rule 701-302.60 - Additional First-year Depreciation Allowance

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Assets acquired after September
				10, 2001, but before May 6, 2003.
For tax periods ending after
				September 10, 2001, but beginning before May 6, 2003, the additional first-year
				depreciation allowance ("bonus depreciation") of 30 percent authorized in
				Section 168(k) of the Internal Revenue Code, as enacted by Public Law No.
				107-147, Section 101, does not apply for Iowa individual income tax. Taxpayers
				who claim the bonus depreciation on their federal income tax return must add
				the total amount of depreciation claimed on assets acquired after September 10,
				2001, but before May 6, 2003, and subtract the amount of depreciation taken on
				such property using the modified accelerated cost recovery system (MACRS)
				depreciation method applicable under Section 168 of the Internal Revenue Code
				without regard to Section 168(k).
If any such property was sold or disposed of during the tax
				  year, the applicable depreciation catch-up adjustment must be made to adjust
				  the basis of the property for Iowa tax purposes. The gain or loss reported on
				  the sale or disposition of these assets for federal tax purposes must be
				  adjusted for Iowa tax purposes to account for the adjusted basis of
				  assets.
The adjustment for both depreciation and the gain or loss on
				  the sale of qualifying assets acquired after September 10, 2001, but before May
				  6, 2003, can be calculated on Form IA 4562A.
See 701-subrule 53.22(1) for examples illustrating how this
				  subrule is applied.
(2)
Assets acquired after May 5, 2003, but before January 1, 2005.
For tax periods beginning after May 5, 2003, but beginning before January 1,
				2005, the bonus depreciation of 50 percent authorized in Section 168(k) of the
				Internal Revenue Code, as amended by Public Law No. 108-27, Section 201, may be
				taken for Iowa individual income tax. If the taxpayer elects to take the 50
				percent bonus depreciation, the depreciation deduction allowed on the Iowa
				individual income tax return is the same as the depreciation deduction allowed
				on the federal income tax return for assets acquired after May 5, 2003, but
				before January 1, 2005.
a. If the taxpayer
				elects to take the 50 percent bonus depreciation and had filed an Iowa return
				prior to February 24, 2005, which reflected the disallowance of 50 percent
				bonus depreciation, the taxpayer may choose between two options to reflect this
				change. Taxpayer may either file an amended return for the applicable tax year
				to reflect the 50 percent bonus depreciation provision, or taxpayer may reflect
				the change for 50 percent bonus depreciation on the next Iowa return filed
				subsequent to February 23, 2005. Taxpayer must choose only one of these two
				options. Regardless of the option chosen, taxpayer must complete and attach a
				revised Form IA 4562A to either the amended return or the return filed
				subsequent to February 23, 2005.
EXAMPLE 1: Taxpayer filed a 2003 Iowa individual income tax
				  return on April 15, 2004, which reflected an adjustment of $50,000 for the
				  difference between federal depreciation and Iowa depreciation relating to the
				  disallowance of 50 percent bonus depreciation. Taxpayer now elects to take the
				  50 percent bonus depreciation for Iowa tax purposes. Taxpayer may either amend
				  the 2003 Iowa return to reflect a $50,000 reduction in Iowa taxable income, or
				  taxpayer may take the additional deduction of $50,000 on taxpayer's 2004 Iowa
				  return that is filed after February 23, 2005.
EXAMPLE 2: Assume the same facts as given in Example 1, and
				  taxpayer filed a 2004 Iowa return prior to February 24, 2005. Taxpayer did not
				  take an additional $50,000 deduction on the 2004 Iowa return. Taxpayer may
				  either amend the 2003 Iowa return to reflect a $50,000 reduction in Iowa
				  taxable income, or taxpayer may take the additional deduction of $50,000 on
				  taxpayer's 2005 Iowa return.
b. If the taxpayer elects not to take the 50
				percent bonus depreciation, taxpayer must add the total amount of depreciation
				claimed on assets acquired after May 5, 2003, but before January 1, 2005, and
				subtract the amount of depreciation taken on such property using the modified
				accelerated cost recovery system (MACRS) depreciation method applicable under
				Section 168 of the Internal Revenue Code without regard to Section 168(k). If
				any such property was sold or disposed of during the tax year, the applicable
				depreciation catch-up adjustment must be made to adjust the basis of the
				property for Iowa tax purposes. The gain or loss reported on the sale or
				disposition of these assets for federal tax purposes must be adjusted for Iowa
				tax purposes to account for the adjusted basis of assets. The adjustment for
				both depreciation and the gain or loss on the sale of qualifying assets
				acquired after May 5, 2003, but before January 1, 2005, can be calculated on
				Form IA 4562A.