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How to expense remaining basis for Sec 174 assets

Travis Hammer
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We have software placed in service between 2022 and 2024 that have unamortized basis as of 2025. How can we immediately deduct the remaining basis in 2025 under OBBBA?

I've tested changing the depreciation method, life, and beginning date, beginning YTD, and beginning accum information but nothing seems to work as expected. 

Thanks for the help.

  • 0
    Suggested

    Hello Travis,

    I am unaware of any changes made for 2022 – 2024 assets which would reduce the basis to zero. Assets Placed-in Service after 1/19/2025 can now take the 100% 168 allowance if you have the 2026.1 version installed, but I have not heard of any changes to assets Placed-in Service prior to 1/20/2025.

    Do you have any documentation about changes for assets Placed-in Service prior to 1/20/2025?

    ~Delray

  • 0 in reply to Delray

    I'm referring to the transition relief for previously capitalized 2022-2024 R&E expenses. We have capitalized domestic R&E software that qualifies for the accelerated deductions.

    After some tinkering, I was able to create custom depreciation methods in Sage to take 100% of the amortization in 2025, kept the beginning accumulated amortization the same, and forced recalculation for each of the affected assets. The beginning accumulated matches the ending amounts from last year, and amortizes the remaining basis in 2025, and ends with zero basis. 

    If anyone knows an easier method, please advise. 

  • +1 in reply to Travis Hammer
    Verified Answer

    Hello Travis,

    Are you talking amortized, a.k.a. Property type Z, assets? If that’s the case, and since most of the Tax rules I was worried about would not apply, then all you need to do is change the method to a remaining life method (RV, RH or RM) and adjust the life accordingly.

    See How to fully depreciate an under depreciated asset for details and there is an Excel file attached which will help calculated the life changes needed.

    Without the details of the asset, one at a time, it is impossible to be more precise. 

    ~Delray

  • 0 in reply to Delray

    That worked! Thank you. Yes, they are the amortizable property type Z assets. Using the Excel file to revise the estimated life seems to have been the difference to get it to work easily. 

  • 0 in reply to Delray

    Great info, Delray! The downloadable Excel file is perfect for revising the estimated life of assets.

    Here's general guidance on the three Remaining Values methods - they all spread the asset's remaining depreciation over the remaining life on a straight-line basis. The averaging convention is different for each. 

    RV - Full-month averaging convention
    RM - Mid-month averaging convention
    RH - Half-year averaging convention (can switch to midquarter)

    More details are available in help: Remaining Value Over Remaining Life Methods 

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