Depreciation Expense for 2014 Wisconsin Tax Returns

The federal Tax Increase Prevention Act of 2014 was signed by the President on December 19, 2014. This Act retroactively extended for 1 year a number of federal tax provision that had expired for 2014. The extensions of these provisions generally do not apply for Wisconsin for 2014.

Included in the Act were extensions of a number of provisions relating to depreciation. For example:

  • 50% special (bonus) depreciation to certain property placed in service in 2014
  • 15-year recovery period for leasehold improvement property and restaurant property
  • 50% depreciation deduction for cellulosic fuel ethanol plant property
  • treatment of race horses as 3-year property
  • accelerated depreciation for Indian reservation property
  • 7-year cost recovery for motorsports racing track facilities

Wisconsin law provides that depreciation is determined under the Internal Revenue Code that was in effect on January 1, 2014. Therefore, the depreciation provisions that are extended under the Internal Revenue Code as a result of the Tax Increase Prevention Act of 2014 do not apply for computing depreciation for Wisconsin. These depreciation differences apply to all entities including individuals, corporations, partnerships, estates and trusts.

How to adjust for differences in federal and Wisconsin depreciation expense:

Individuals: Individuals use Schedule I, Adjustments to Convert 2014 Federal Adjusted Gross Income and Itemized Deductions to the Amounts Allowable for Wisconsin, to adjust for the difference in depreciation. Schedule I must be attached to the Wisconsin Form 1 or 1NPR.

Estates and Trusts: Estates and trusts use Form 2, Schedule B, Adjustments to Convert 2014 Federal Taxable Income to the Amount Allowable for Wisconsin, to adjust for the difference in depreciation.

Corporations not filing as part of a combined group: Use Schedule 4V, Wisconsin Additions to Federal Income, line 7 to adjust for the difference in depreciation. Schedule 4V must be attached to Wisconsin Form 4, Wisconsin Non-Combined Corporation Franchise or Income Tax Return.

Corporations filing as part of a combined group: Use Form 6, Wisconsin Combined Corporation Franchise or Income Tax Return, Part II, line 2i to adjust for the difference in depreciation.

Tax-Option (S) Corporations: Use Form 5S, Wisconsin Tax-Option (S) Corporation Franchise or Income Tax Return, Schedule 5K, line 1, column c to adjust for the difference in depreciation.

Partnerships: Use Form 3, Wisconsin Partnership Return, Schedule 3K,line 1, column c to adjust for the difference in depreciation.

December 23, 2014