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.
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.
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
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.
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?
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!
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.
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
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?
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.
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.
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.
The vehicle was used 100% for business for both years.
Could there be an error in the Turbo Tax calculation?
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?
Could you tell us how TurboTax is calculating Mass. state depreciation?
Looking at the Activity Worksheet for 2021 Part II - Regular Income/Loss - Line 1 Federal income is 10,176 Line 2a Bonus Depreciation is 15081 (the full cost of the farmstand) and line 2b Other depreciation adjustment is 1273 (prior year sec 179 adjustment I presume). Line 3 (sum of lines 1, 2a and 2b) is 26,530 which ends up being the farm profit shown on the Massachusetts return. Shouldn't at least "Normal" MACRS depreciation be allowed on the MA return? See attached screenshot of the worksheet
2024 and still have the same issue. anyone had a solution on this
I've also been going crazy with the "depreciation adjustment," which increases AGI on the MA return. It has nothing to do with the Sec 179 or bonus depreciation taken on the federal return. I just printed (to .pdf) the ALL FORMS AND WORKSHEETS package, and the last page of the federal documents is a Schedule E Worksheet (for a rental property I have) that shows "non-conformity" between how depreciation is calculated on Cars and Trucks for Federal purposes versus how it is calculated for MA. The depreciation for MA is much less. After further digging on Mass.gov, the only reference to this I found was on a webpage entitled "TIR 03-25: Depreciable Business Assets; Modifications For Decoupling From Federal Bonus Depreciation," which was last updated in 2004. According to the webpage, it would appear that MA uses REV. PROC. 2003-75 TABLE 1 as the limitations for passenger vehicles... it's a 2003 table that hasn't been (and doesn't get) adjusted for inflation. It seems wonky to me, but after recalculating the MA depreciation myself using the 2003 limits in Table 1 for a vehicle put into service in 2020, I was able to calculate the depreciation adjustment for the last few years. That explains why my depreciation expense for MA has been significantly lower than the Federal amount every year. Whether it's right or wrong, I don't know!