Year-End Tax Planning Differences

​During December, there are many articles published from various sources related to year-end tax planning. Taxpayers are generally reminded of the 2009 federal deductions for bonus depreciation and increased section 179 expense and for the addition to the standard deduction for state and local real estate tax paid and sales tax paid on the purchase of a new motor vehicle.

Wisconsin tax treatment of these items is different than the federal tax treatment.

  • Wisconsin does not allow the federal 50% bonus depreciation. All depreciation is instead determined under the Internal Revenue Code in effect on December 31, 2000. Taxpayers must file Wisconsin Schedule I (Adjustments to Convert 2009 Federal Adjusted Gross Income and Itemized Deductions to the Amounts Allowable for Wisconsin) to adjust for this difference.

  • For federal tax purposes, the maximum sec. 179 expense deduction under the Internal Revenue Code for 2009 is generally $250,000. For Wisconsin, the amount that may be expensed under sec. 179 is limited to $25,000 with one exception. For a taxpayer who is actively engaged in farming, the amount that may be expensed under sec. 179 is limited to $120,000. As with bonus depreciation, taxpayers must file Wisconsin Schedule I to adjust for this difference.

  • For federal purposes, taxpayers who claim the federal standard deduction may add to that standard deduction up to $500 of state and local real estate tax paid in 2009 and state or local sales tax paid that is attributable to the first $49,000 of the purchase price of a new motor vehicle purchased after February 16, 2009. Wisconsin does not allow any additional amounts to be added to the Wisconsin standard deduction.

December 7, 2009