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Federalizing Depreciation and Depletion

The 2013-15 state budget federalizes state rules pertaining to depreciation, Section 179 expensing, and depletion for property placed in service on or after January 1, 2014.

For property placed in service before January 1, 2014, the difference in state and federal tax basis must be consolidated into a single asset account that may be depreciated or amortized from 2014 through 2018.  Following this five-year transition period, compliance will be simplified by only adhering to the federal rules.

The basis of assets and partnership interests under state law would be equal to the federal basis to the greatest extent possible for these provisions.

Future changes made to the Section 179 expensing provision by Congress will now automatically be adjusted at the state level (the same does not hold true for depreciation or depletion changes).  Wisconsin has not federalized Section 179 provisions since 2001.

For 2013, the federal government allows a Section 179 expense deduction of $500,000 with an investment limit of $2 million.  By comparison, Wisconsin’s expense deduction is $25,000 with an investment limit of $200,000.




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