I would like to take bonus depreciation on assets I placed in service this year. I copied the text of my previous post below to give a little background. If I take federal bonus depreciation, I have no issue with Oklahoma since they fully conform. Unfortunately Ohio does not, and requires a 5/6 addback of bonus depreciation if I show taxable income on the federal level, or 6/6 addback if I don't show taxable income. My question is this: is bonus depreciation taken AFTER you figure regular depreciation (I would do straight-line depreciation over 5 years), or is it in place of regular depreciation? If it is in place of regular depreciation, therefore not showing any other depreciation, and my taxable income is reduced to zero from the bonus depreciation, then I would be adding back 6/6 and would have ZERO depreciation deduction on my Ohio taxes for the first year. Consequently, I would owe taxes on all income generated by the assets this first year. Is this true, or am I missing something here? I'm sure this is also an issue with other states that don't conform to federal bonus depreciation. I would like to take the bonus depreciation on the federal level so I can get a refund and be able to use that money to purchase additional equipment, but if I get no depreciation deduction the first year in Ohio, this may not be a wise move.
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Multi-State Bonus Depreciation
If any of you have read my previous questions, I have farm equipment located in Oklahoma that I receive rental income on. It was put in service this year. I am an Ohio resident. The equipment is classified as a 5-year property for depreciation purposes and it is eligible for bonus depreciation. The issue is that while Oklahoma fully conforms to IRS bonus depreciation rules, Ohio does not. Ohio requires addback of the bonus depreciation amounts. This seems to create a messy tax situation when doing my Ohio and Oklahoma tax returns. I'm assuming that while I won't have Oklahoma taxable income this first year if I take bonus depreciation, I will then be fully taxed on the Oklahoma income in Ohio since Ohio doesn't conform to bonus depreciation. Am I correct in assuming this? If so, would I just be better off not taking bonus depreciation at all and just do straight-line depreciation over 5 years? Is there anything else to consider with this situation that I might be missing?
