x Want to participate? Join the group to interact
Options
  • State Suggested Answer
  • Replies 16 replies
  • Answers 3 answers
  • Subscribers 1 subscriber
  • Views 180 views
  • Users 0 members are here
Browse Forums
Announcements
32
topics
2
replies
General Discussion
851
topics
2k
replies
Laura Susko

Section 168 bonus depreciation on luxury autos

SUGGESTED
Posted By

I know the final update reflecting 2015 tax law will not be released until version 2016.1 in early February 2016.  However, Bill and Lovisa have advised on this forum that updating depreciation methods in the TAX and AMT books to MA200 or MA150 will reflect 50% bonus depreciation.  For assets with code P, this is true.  However, for assets with code A, it isn't working.

Luxury autos are limited to regular depreciation of $3,160 in year one.  If bonus is elected, bonus is capped at $8,000, making the 168 Allowance $8,000 and regular depreciation $3,160 for a grand total expense of $11,160 for 2015.

I just updated a new luxury auto in our system and Sage is returning incorrect expense.  The system is showing $3,160 as the 168 Allowance and zero as the Current YTD and Current Accum.  The 168 Allowance should be $8,000 and the Current YTD should be $3,160.  Both the TAX and AMT books are wrong.

If not fixed by 1/8/16, our company will be forced to manually calculate depreciation on all luxury autos, manually update all of our reports and then delete and re-enter each 2015 auto in 2016 so we can force the accumulated depreciation amounts to be correct.  That's what we had to do last year.  When we purchased the software 18 months ago, we were told Sage could handle luxury auto depreciation for tax purposes.  It was wrong for 2014 and the 2015 update didn't fix it.

Almost every business needs the luxury auto depreciation limits to work.  When will this be fixed?

  • 0
    SUGGESTED
    Hello Again Laura,

    O’ I see what you meant now in the other thread, no, that is not how it works – 168 Allowance is not depreciation – it is a reduction of basis and that calculation must occur before the depreciation calculation.

    The major factor to keep in mind in this case is: 168 is not a function of time, it is given to you at the start of the asset’s life and is always taken in the first month of the asset’s life whereas a depreciation calculation accumulates over time.

    So, you have your brand new $40,000 car sitting in the parking lot (might as well go big, right?) which 168 allowance calculation says you can only calculate depreciation on $20,000 worth of that asset. Then the first year’s calculation is $40,000 * 50% = an amount greater than the allowed by the limit so the only amount which appears for the first year is a portion of the total bonus allowance therefore there is not a calculation on depreciation in the first year.

    The program is calculating in accordance with Tax advice received from the IRS.
  • 0
    SUGGESTED
    I do understand what you are looking for from the program. I was attempting to explain why and how you are incorrect. What you are asking is not, and never has been, the way the program functions. We have had long consultation directly with the IRS, they have agreed to the calculation which you see in the program. We just do not make this stuff up.

    Unless you have specific code section which I can forward to R&D for review, my only answer could be that the program is calculating correctly.
  • 0
    The assets with property type A and T that need to take 168 bonus where currently it only shows the limited depreciation without the $8000 168 amount for 2015 assets in the 2016.1 release that will be available in the beginning of February 2016. As for the older assets that the 168 allowance was applied where the $8000 also did not get reflected correctly you are able to use the 168 allowance switch for these assets and turn off the 168 and then turn around to apply the 50% 168 allowance on them again. This should help.
  • 0
    Delray, the program is NOT calculating in accordance with IRS rules. I have a new vehicle placed in service 12/8/15 that cost $29,507.50. I have the Property Type as A and the Depreciation Method as MA200 for Tax and MA150 for AMT. The 168 Allowance % field indicates 50 for both columns. When I calculate depreciation on this asset, the system returns $3,160 as the 168 Allowance amount and zero as the Current YTD expense. That is wrong. The 168 Allowance should be $8,000 per IRS rules and the Current YTD regular depreciation should be $3,160 to reflect the rules for luxury auto limits. Total expense for this auto for 2015 should $11,160. The law for 2015 and 2014 are the same, so it shouldn't matter that the 2015 law isn't reflected yet. I am looking at this on-screen in the 2015.2 version of the software right now as I type this. It's incorrect.
  • 0
    With the 168 amount of $8000 that is missing from the assets placed in service in 2015 is due that the extension for this was not available in 2015.1 and 2015.2 due to law stating that this was not extended. This is being coded for extension in the 2016.1 release. IRS and Sage has to wait on Congress to pass the budget into law so that Sage (based on IRS guidelines) then can write the code to make the corrections in Fixed Assets for Tax purposes on this law. For 2015.1 tax update the budget that congress released and passed into law stated that the 168 amount was discontinued after 12/31/2014 so that is how we had to code the software. Now as the new budget and tax depreciation is in law and extended since the middle of December we are coding this to follow the IRS guidelines. However we have to wait until Congress released the budget and get that signed by the President of the United States before we can do our part of coding the information into the software.
  • 0
    Delray, sure, IRS Publication 946, page 62, clearly shows that first year depreciation on a luxury auto when section 168 bonus depreciation is elected is $11,160. That number is comprised of $8,000 of section 168 bonus depreciation and $3,160 of luxury auto limited regular depreciation. As Sage is only showing $3,160 for the 168 Allowance and zero for regular depreciation, the Sage calculation is absolutely incorrect. For 2015, total expense for tax and AMT purposes on a new vehicle for which section 168 bonus depreciation was election should show $11,160. Sage only shows $3,160. That is incorrect per the IRS guidance.

    All other software that I have ever worked with, and I have been in practice since 1995, has been able to accurately handle luxury auto depreciation limits and since 2001, section 168 bonus depreciation elections on autos. The 2015 expense on our new vehicle should be $11,160 and Sage calculates only $3,160. It doesn't matter which boxes in Sage I add together or how I run my reports, Sage only calculates $3,160. It is 100% wrong.

    When will this problem be fixed?
  • 0
    And, by the way, our consultants, who are a preferred Sage customer and actively recommend your product, as they did to us, informed us in Summer 2014 that this is a KNOWN error in Sage and that Sage was supposed to be fixing it in January or February of 2015.
  • 0
    Straight out of IRS Publication 946. Until Sage calculates $11,160 on a new auto electing bonus, the software is wrong.


    Passenger Automobiles
    The maximum deduction amounts for most passenger automobiles
    are shown in the following table.
    Maximum Depreciation Deduction
    for Passenger Automobiles
    Date 4th &
    Placed 1st 2nd 3rd Later
    In Service Year Year Year Years
    2014 $11,160 $5,100 $3,050 $1,875
    2013 11,160 5,100 3,050 1,875
    2012 11,160 5,100 3,050 1,875

    If you elected not to claim any special depreciation
    allowance or the vehicle is not qualified property, the
    maximum deduction is $3,160.
  • 0
    Lovisa, so Delray's response that Sage is correct per the IRS is incorrect after all. I wish you had responded earlier and saved me a ton of time getting your R&D department IRS guidance because I spoke with you on the phone about this issue last fall and I know Sage knew it was a problem. The calculated amount should be $11,160 if bonus is elected or the calculation is wrong.

    However, this was supposed to be fixed with the 2015.1 update and this was represented to us and our outside consultants more than once last fall. Now we have to wait until the 2016.1 update, which is too late for our organization. We have to have final tax depreciation data before our financial statement audit begins on 1/18/16. We will be stuck with a manual fix again this year.

    Very disappointing, to say the least, but I'm glad someone at Sage finally admitted the software has this flaw so everyone else using the software can at least be aware there is a problem with the tax and AMT depreciation calculations on luxury autos electing bonus.
  • 0
    I had already replied with a solution as to what can be done to correct your 2014 assets as stated in the post above from today at 1:58 PM EST. Here is the response again for easy access: As for the older assets that the 168 allowance was applied where the $8000 also did not get reflected correctly you are able to use the 168 allowance switch for these assets and turn off the 168 and then turn around to apply the 50% 168 allowance on them again. This should help. If you do have trouble with these steps please contact our support team for assistance.

*Community Hub is the new name for Sage City