Depreciation

Facts

Enter the following information for a sample client:

Program Considerations

All Programs:

• The Depreciation screen displays three lists to the left of the input pane: Show Assets for, Asset, and Section. The lists are arranged in a hierarchy. Therefore, the selection you make in the Show Assets for list affects the items that are displayed in the Asset list.
• Use the Show Assets for list to select the form or schedule to which the depreciation input applies. Use the Asset list to select the particular asset. Use the Section list to quickly select a section of the depreciation input.
• The program accepts an unlimited number of depreciable assets per return.
• Enter the Activity Name or Number for each asset to indicate the form or schedule on which the depreciation deduction should be reported.
• The minimum entries required to calculate depreciation for a specific asset are as follows:
• Form (from table)
• Activity Name or Number
• Date placed in service
• Cost or Basis
• Method
• Life (required only for nonrecovery methods)
• Convention (required only for MACRS assets with a date placed in service prior to the current year)
• The program applies luxury car limitations to assets with method 30, 31, 45, 46, 55, or 56 (as entered in Method). For any other method, check the Listed property box in the Automobiles and Other Listed Property section if the asset is listed property but should not be subject to the luxury car limitations. The program limits the depreciation on luxury automobiles according to the rules set forth in the instructions for Form 4562.
• An entry in Total Mileage is mandatory to generate Form 4562, Part V, Section B. Enter in the appropriate input fields the total number of miles the taxpayer drove the vehicle this year for business and for commuting to and from work. The program uses these entries to determine the business use percentage.

  Note: Prior year Total and Business mileage will proforma year to year, ensuring the correct business use percentage is used. If you are entering a vehicle in this screen for the first time, and there was associated prior year mileage, open the (Ctrl+E) expanded input to make those entries.

  
• If you elect section 179 expense for the current year, the program calculates the following limitations:
• Maximum dollar limitation: Determined by the total cost of all section 179 qualifying property.
• Investment limitation: Required only when the total cost of all section 179 qualifying property is greater than $420,000.
• Taxable income limitation: Determined by the taxable income from the active conduct of any trade or business during the year.
• Special Depreciation: The Special Depreciation Allowance (SDA) of the 2002 and 2003 Tax Acts generally applies to assets placed in service prior to 1/1/2005. Therefore, beginning with the 2005 tax program, Lacerte will not automatically calculate this amount. Assets eligible for the SDA require an entry in the Special depreciation allowance: 1=50%, 2=30% field. (Press [F1] on this field for more information).
  

Individual Program:

• If the asset is used less than 100% for business, enter the business use percentage in .xxxx format in the Percentage of business use (.xxxx) field. When the business use percentage is less than 100%, the program calculates depreciation by multiplying the cost or basis by the business use percentage to determine the maximum depreciable basis.

• When the business use percentage is less than 50%, the program uses the straight-line method for ACRS and MACRS property. See the Vehicles exercise in the Individual Returns section for a detailed discussion of mileage and expense entries.

• For Home Office: If you send assets to Form 8829 that are subject to home office limitations, the program calculates the business percentage based on square footage. If the asset should be calculated at 100%, enter 1. An entry in this input field overrides the business use percentage for the asset.

Partnership Program:

• An input field is available for specially allocated depreciation.
• If an asset has book depreciation that is different than the regular tax depreciation, there are entries for entering the book depreciation information.
• The program adds current year Federal tax depreciation expense to the beginning balance of Less Accumulated Depreciation to calculate the end of year balance for Less Accumulated Depreciation on the Balance Sheet unless an entry is made in Screen 25, Balance Sheet Miscellaneous for Current year book depreciation.

Corporate Program:

• If an asset has book depreciation that is different than the regular tax depreciation, there are entries for entering the book depreciation information.
• The program adds current year Federal tax depreciation expense to the beginning balance of Less Accumulated Depreciation to calculate the end of year balance for Less Accumulated Depreciation on the Balance Sheet unless an entry is made in Screen 38, Balance Sheet Miscellaneous for Current year book depreciation.

S-Corporate Program:

• If an asset has book depreciation that is different than the regular tax depreciation, there are entries for entering the book depreciation information.
• The program adds current year Federal tax depreciation expense to the beginning balance of Less Accumulated Depreciation to calculate the end of year balance for Less Accumulated Depreciation on the Balance Sheet unless an entry is made in Screen 30, Balance Sheet Miscellaneous for Current year book depreciation.

Fiduciary Program:

• An estate or trust cannot make the election to expense certain tangible property under section 179 so there are no input fields available for section 179 expense.
• The program carries federal depreciation from Screen 27, Depreciation to the Balance Sheet on Form 5227 unless an override is entered in Screen 49, Balance Sheet for the ending balance of accumulated depreciation.

How?

To add an asset:

1. Open the sample client.
2. Open the Depreciation screen.
3. Click Add in the Asset list.
   

   Note: You do not have to click Add for the first asset entered in this screen.

4. Enter the information from the Depreciation table above in the appropriate input fields.

   Note: If you open the Depreciation screen after opening a screen for a form or schedule that may have depreciation associated with it, the program automatically selects that form or schedule in the Show Assets for list and displays only related assets. If no assets exist for that form or schedule, the program automatically assigns the Form and Activity name or number for any new assets you add. You can also go directly from a prefixed form or schedule to depreciation using the button at the top of each input screen.

   

To delete an asset:

1. Highlight the asset.
2. Click Delete in the Asset list.
   

To view assets for a different form or schedule:

1. Click the form or schedule in the Show Assets for list.
2. Click the asset in the Asset list.

Tips & Shortcuts

Press [Ctrl]+[A] to add another asset and [Ctrl]+[D] to delete a selected asset.

Review

You should have a sample client with an asset listed in the Depreciation screen and the following on the 2005 Depreciation Schedule:

• Current year depreciation: $400

Troubleshooting

Problem: I do not see depreciation on the 2005 Depreciation Schedule.

Solution: Make sure you entered the Date placed in service, Cost, and Method. These are mandatory entries.

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