Depreciation

Massachusetts follows federal depreciation with the exception that any bonus depreciation claimed under H.R.3090 is not allowed. For current year acquisitions entered on the depreciation worksheets this adjustment is automatically made. The adjustment is made to federal ordinary income, rental real estate income or income from other rental activities, as applicable. No further entries are required. To override this adjustment and any other depreciation difference use Massachusetts' Income/Deductions worksheet. To override the adjustment when it affects rental real estate income, use the Massachusetts' Income/Deductions worksheet Other Adjustments to Federal Ordinary Income section; for other rental activities, also use the Massachusetts' Income/Deductions worksheet Other Adjustments to Federal Ordinary Income section.

For prior year assets on which bonus depreciation was claimed on the depreciation worksheets, an entry on the depreciation worksheets in the state if different input may be required. Enter "0" on the depreciation worksheets in the state if different input for bonus depreciation taken in the prior year. If the prior year return was processed by us this entry is automatically created by our Pro Forma program. No entry is necessary for a current year asset.

There have been other periods when Massachusetts law did not conform to federal, for instance the state did not immediately adopt MACRS. Any difference between federal and Massachusetts depreciation is included on the "Other Adjustments" line of Massachusetts Form 3, Part II, if the difference affects ordinary income. Note, however, that no adjustment is made on Form 3 if there is a gain or loss difference for Massachusetts when assets are sold using the automatic sales feature.

State-if-different depreciation can be entered on the depreciation worksheets in the state if different input for more than the home state. A State/Book Code is available to identify any asset on the depreciation worksheets in the state if different input that is for a state or book entry other than the home state. If the State/Book Code is left blank, the following order will be used to determine where the depreciation is to flow:

Code 'BK" is assumed if "X to treat State-if-Different Assets as Book Assets" is checked on the depreciation options worksheet.
The State/Book Code is assumed to be the same state code entered on the rental or farm worksheets associated with the depreciation worksheets.
Code 'BK" is assumed when "F" is entered for FS code and a state code is not present on the rental or farm worksheets.
The State/Book code is assumed to be the home state code in the basic data worksheet when "S" is entered for the FS Code on the rental or farm worksheets and there is no state code entered.
A code of "XX" is assumed if the state code is blank on the basic data worksheet.

There can be more than one entry for each asset on the depreciation worksheet in the state if different input. This allows an asset to use different depreciation methods in different states. A unique State/Book Code is required for entries for the same asset on the depreciation worksheets in the state if different input.

If different from the federal amount, the section 179 expense deduction for Massachusetts can also be entered on the Capital Gains and Losses section of the Income/Deductions worksheet. Use the Capital Gains and Losses section of the Income/Deductions worksheet to override the Massachusetts source expense deduction for nonresident partners. Use code 23433 on the special allocations detail section to specially allocate the Section 179 expense deduction; code 23448 for nonresident partners.

If the depreciation adjustment is known and it effects ordinary income, enter it on Massachusetts' Income/Deductions worksheet. Enter the adjustment as a negative adjustment if the Massachusetts depreciation exceeds the federal depreciation.