ME - Depreciation/Section 179

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Maine Depreciation/Section 179 Addback

Federal taxable income for Maine must be increased by the net effect of the following amounts reflected in federal taxable income:

  1. 30% bonus depreciation,
  2. 50% bonus depreciation, and
  3. Increase in section 179 expense due to federal changes (deduction limit increase from $25,000 to $108,000; phase-out threshold increase from $200,000 to $430,000; and certain off-the-shelf computer software includable as eligible property).

The amount of this addback is determined by first recalculating the depreciation deduction and section 179 expense on federal Form 4562 exclusive of all bonus depreciation and the section 179 expense increases listed above. The difference between the recalculated depreciation/section 179 expense and the original is added back to Maine.

Please note that S-Corporations/Partnerships will pass the depreciation/section 179 addback onto the shareholders/partners. Fiduciaries may pass a portion or all of the depreciation addback to the beneficiaries.


Maine Depreciation/Section 179 Deduction

Depreciation/section 179 added back to income starting in 2002 may be recaptured over the life of the applicable asset. For property placed in service in 2002, addition modifications may be recaptured in equal amounts over the remaining life of the asset beginning in 2004. For assets placed in service in 2003, 5% of the addition modification is recaptured in 2004, with the remaining 95% recovered in subsequent tax years, in equal installments, over the remaining life of the applicable asset.

Examples:

2002 addback

  • 3-year property addback of $1000 will allow $1000 to be deducted in 2004
  • 5-year property addback of $1000 will allow $333 to be deducted in 2004 - 2006
  • 7-year property addback of $1000 will allow $167 to be deducted in 2004 - 2008
  • 10-year property addback of $1000 will allow $125 to be deducted in 2004 - 2011
  • 15-year property addback of $1000 will allow $67 to be deducted in 2004 - 2016
  • 20-year property addback of $1000 will allow $50 to be deducted in 2004 - 2021

2003 addback

  • 3-year property addback of $1000 will allow $50 deducted in 2004 and $475 in 2005-2006
  • 5-year property addback of $1000 will allow $50 deducted in 2004 and $238 in 2005-2007
  • 7-year property addback of $1000 will allow $50 deducted in 2004 and $158 in 2005-2009
  • 10-year property addback of $1000 will allow $50 deducted in 2004 and $106 in 2005-2012
  • 15-year property addback of $1000 will allow $50 deducted in 2004 and $68 in 2005-2017
  • 20-year property addback of $1000 will allow $50 deducted in 2004 and $50 in 2005-2022

2004 addback

  • Done in the same manner as the 2003 addback with the years allowed for deduction being increased by one year.

For additional examples please see Maine Depreciation/Section 179

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