Setting up MACRS 50% Bonus Depreciation Rules in Fixed Assets
On Sept. 27, President Obama signed the Small Business Jobs Act (H.R. 5297) into law, reinstating the 50 percent depreciation bonus for 2010 (retroactive to the beginning of the year) and increasing Sec. 179 expensing levels to $500,000 (and the phase-out threshold amount to $2 million) for 2010 and 2011. (see more at http://www.depreciationbonus.org)
If you’re using the JD Edwards Fixed Assets module, you may have already discovered that the software does not have a 50% MACRS Bonus Depreciation rule. Never fear! This article will demonstrate how to create this rule. And if a 60% Bonus Depreciation is passed into law in the near future, the same principles will apply to create that rule as well. If you’re interested in setting up 100% Bonus Depreciation, you can find that article here.
Step 1. Create new Formulas
2 new formulas will need to be created. The easiest way is to take an existing formula and copy it. Thus, existing formula 541 will be copied into a new formula R03. And existing formula 543 will be copied into a new formula R04.
From the Work With Depreciation Formulas screen P12853, find formula 541, select it, and click Copy. Enter value R03 into the Formula ID field, change the Formula Description, and enter a value of .500000 into the multiplier field:
From the Work With Depreciation Formulas screen P12853, find formula 543, select it, and click Copy. Enter value R04 into the Formula ID field, change the Formula Description, and enter a value of .500000 into the multiplier field:
Step 2. Create new Depreciation Rules
New Depreciation Rules will need to be created for each grouping of Life Months, Initial Term Apportionment and Compute Direction.
As with the Formulas above, the easiest way is to find an existing Rule, and copy it. For this example, we are creating a 5-year 50% Bonus Depreciation MACRS rule with a mid-Year Convention. The rule that fits this bill is Depreciation Method 50:
Select the Depreciation Method 50 and click Copy. Next, replace Depreciation Formula 541 with the new formula R03. Replace Basis Formula 543 with the new formula R04:
Repeat the copy/replace steps for all Life Months/Initial Term Apportionment/Compute Direction combinations, to create 3, 5, 7, 10, 15 and 20-year rules as necessary.
Step 3. Assign new Depreciation Rule to Assets
Now that the new 50% Bonus Depreciation rule has been setup, it can be assigned to an asset. Select the appropriate Tax Ledger to receive the depreciation. Now you are ready to run R12855 Compute Depreciation!
Step 4. Run a test
For a 10-year, Mid-Year Convention, Inception-to-Date rule, the results of running depreciation should be:
Cost is $100,000
Accumulated Depreciation in year 1 $55,000
Accumulated Depreciation in year 2 $9,000
Accumulated Depreciation in year 3 $7,200
How do you set up this rule for 150% declining with balance cross over?
The method is similar for 150% declining, or even straightline depreciation. The difference comes in step 2 – deciding which existing method to copy. To answer Susan’s question, we would pick method 04 instead of method 50.