Why is there a depreciation adjustment on my Massachusetts state return?

[yanko]

This is reported on the Federal/State adjustment summary page of the return, as an adjustment to schedule E (column B).

[MaryK4]

Usually the Massachusetts adjustment is related to Bonus Depreciation.  A Massachusetts taxpayer that claims bonus depreciation 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.

There is also a state adjustment for some automobiles. 

See TIR 03-25.

[Buddy95]

Does Turbo Tax make that adjustment for bonus depreciation automatically or do I have to enter that adjustment somewhere manually or indicate somewhere that it needs to be calculated differently for the Mass. return?  Seems like the farm income shown on the Mass return is much higher than it should be compared to the Fed. farm income.  Looks like it failed to depreciate the asset at all on the Mass return.

[MaryK4]

If you used TurboTax, there should be a state depreciation worksheet that has the Massachusetts amounts and adjustments.  Within the Massachusetts state section, you can make any adjustments- look for the screen below.   @Buddy95

[Buddy95]

I did not sell any assets in 2021 so the capital gain differences screen does not seem to be available for my return in TurboTax.  The depreciation entered on the Federal form is "bonus" depreciation and I am taking the full cost of the item as depreciation in 2021 on my Federal return.  Mass does not allow for bonus depreciation, but it also seems as though Turbo Tax has not given me any depreciation for that asset on the Mass return.  Can't be sure as I have not paid for the return yet and therefore cannot see all the forms associated with my state return  - thank you.

[yanko]

I did not have any bonus depreciation. The depreciation that I have is for rental property over 27.5 years. So why is there a difference and why is there no worksheet or something similar included to tell me where the numbers are coming from?

[yanko]

I have not been able to find the worksheet. I also wasn't able to find any information on the nature of the differenced to allow me to make the manual adjustments in the screen that you showed. Thanks!

[ZoltanB45 · Accepted solution]

Did you  capitalize any additions to the rental property? Perhaps in prior years, Massachusetts expensed a certain item that you capitalized on the federal tax return. If not last year, then maybe the year before.

[yanko]

Ah - the first response that is going somewhere - thank you!

Yes I did - I had some cabinets put in a couple of years ago that are on a depreciation schedule. I know there was a similar adjustment last year, and maybe in prior years I hadn't noticed it.

Thanks again

[ccarbon]

How does Turbo Tax calculate the State depreciation for a vehicle?  The 2021 depreciation amount calculated does not appear correct.  The vehicle was put in service in Oct 2020.  Last year's state depreciation (3 months) and return appear correct.  The depreciation calculated for 2021 is less than double 2020's depreciation when it has been in service for a full year compared to 3 months for 2020.

Also, I am assuming the depreciation adjustment is the difference between what is reported on the federal return for depreciation less the State's depreciation for the current year?

[ThomasM125]

You may have taken bonus or section 179 depreciation on your 2020 tax return. That depreciation would be higher than normal depreciation you would be allowed in years after the first year, even if you only depreciated it for a few months in the first year.

You can look on your 2020 form 4562 to see if there was section 179 depreciation listed on line 8 or bonus depreciation on line 14.

The state depreciation adjustment would be the difference between federal and state depreciation, as you mention.

@ccarbon

[ccarbon]

I did take a special bonus deduction on the Federal return and there was an adjustment on the Mass State Return for the what is allowed for Mass. vs Federal.  My question really is regarding how the State (Mass.) calculated the depreciation this year (2021).  It does not seem correct.  State Depr. for 2020 (3 months) was $2,731 and for 2021 Turbo Tax is calculating it as $5,100 (for 12 months).   This does not make sense to me, unless I am missing something.  I would think the depreciation would be around $10k for the State for the 12 months.

[ThomasM125]

I would agree. The business use percentage of the vehicle could be a factor. You are instructed to enter the business and non-business mileage. If the business use percentage dropped in the second year, that would reduce the depreciation deduction.

@ccarbon

[ccarbon]

The vehicle was used 100% for business for both years.

Could there be an error in the Turbo Tax calculation?

[Buddy95]

I too take issue with how TurboTax is calculating the Mass depreciation deduction in 2021 for an asset that had bonus depreciation on the Federal.  Took bonus depreciation for 2021 for an asset valued at $15081 and placed in service in 2021,  yet it seems like on the 2021 Mass. return it is not allowing for any depreciation at all on that asset.  Shouldn't Turbo Tax allow for at least the std MACRS deduction on the state return?