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Tax Tip Tuesday: Federal and Iowa Accelerated Depreciation Numbers

This week we will look at some accelerated depreciation numbers for both federal and Iowa tax.

Expensing is generally available for:

  • Most depreciable property (other than buildings)

  • Off-the-shelf computer software

  • Qualified real property

For tax years beginning in 2016, the federal section 179 expensing limit is $500,000.

Iowa has not coupled with federal section 179 amounts for the 2016 tax year. That means Iowa is limited to $25,000.

The section 179 limit for Iowa for the 2015 tax year was $500,000, which was the same as the federal section 179 limit. However, Iowa has not coupled with federal law for 2016 as it relates to section 179. If Iowa does not do this, it would mean the federal section 179 amounts for the 2016 tax year will not be effective for Iowa and the limit would stay at $25,000. We hope the Iowa legislative session addresses this earlier than last year.

Businesses also can qualify for 50% bonus first-year depreciation for federal if an eligible property is bought and placed in service this year. Eligible property does not include used property.

The bonus depreciation deduction is permitted without any proration based on the length of time that an asset is in service during the tax year. As a result, the 50% first-year bonus write-off is available even if qualifying assets are in service for only a few days in 2016.

Iowa is not coupled with federal bonus depreciation for assets acquired in 2016.

Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Previous Editions of Tax Tip Tuesday
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