Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for November 10th, 2007

Arkansas’ Section 179 Limit

Posted by taxguru on November 10, 2007

Q:

Subject: Arkansas Section 179 Depreciation

 

Hi, Mr. Kerstetter –

 

Does Arkansas tax code recognize Section 179 Depreciation the same as the US IRS, i.e., can the depreciation be taken in the same year in the same amount, AR=US?

 

Thanks for considering my question.

A:

Like a lot of states, Arkansas has never conformed with the big jump in the Federal Section 179 deduction that took effect in 2003.  Since 1/1/03, the maximum annual Section 179 deduction for Arkansas income tax purposes has been steady at $25,000.  It’s not even adjusted for inflation, as the IRS maximum is.

When we deduct more than $25,000 as Section 179 expensing on a Federal return, an adjustment must be made to the Arkansas amount.  This requires us to have two separate sets of tax depreciation schedules; one for IRS and another for DFA.  It also means that the adjusted cost bases for assets on which Section 179 has been claimed are probably different for Federal and State tax purposes, affecting future depreciation deductions, as well as any gain or loss calculations on the sale of those assets. 

To make matters even more complicated, the carryover bases of traded assets on which Section 179 has been claimed, such as vehicles, becomes ever more divergent between Federal and State with each trade.

Kerry Kerstetter


Follow-Up:

Hi, Kerry –

 

excellent

 

thank you, sir!

 

Business Plan Pro

 

Posted in 179 | Comments Off on Arkansas’ Section 179 Limit