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Video instructions and help with filling out and completing Which Form 2220 Depreciated

Instructions and Help about Which Form 2220 Depreciated

Here are just been going over an overview of this makers tax depreciation system and this is a requirement here by the Internal Revenue Service of the United States government for corporations when they're depreciating their assets here for tax reporting again what does this maker stand for well that's the stands for the modified or accelerated cost recovery system here so that's the abbreviation here for it and what corporations normally do is they're using gap here for their book depreciation but for tax reporting and taxes they have to use this maker system okay so the makers depreciation tax basis it has three main elements here number one it has a mandated tax life generally shorter than the economic life so for GAAP they're using the economic life of the asset and for makers here they're using a tax life and that's a predetermined life here by asset category or whatever your asset is they have a predetermined tax life for it number two the cost recovery is on an accelerated basis in number three and assigned salvage value of zero to your asset here you depreciate your asset to a zero value no salvage value at the end of the makers life here so let's just go and look at a typical text a table here and we're just these are the percentages or of depreciation that you are allowed here per year here in this case so first off let's just look at it here identify the elements and then we're going to look at the definition of these so what we would have here of course we have our years shown here and then we have a particular or specified percentage of depreciation allowed here for each of the each of those years here by a class here and property class what we're talking about peers is 3 5 7 and so on here these are called property classes and what we mean by that is each group of assets or the government would have the IRS would have defined here like for a three year life that might include they'd have a listing of assets here that might be tooling or some small equipment for the shop or in the office desk computer and so forth and then as you move down the chart here each of its identified here as a property class here by number of years here and that's the depreciation here years here on those asset classes you might get up to five years here cars or trucks or something like that and then seven years might be other like machinery or equipment or something like that and then okay Eve so you've got your property class identified here and then you would have the depreciation method here either we'd have a decline it would be declining balance most of the time here there are some options here and then for the method you'd have your particular convention like for example here the declining balance we're looking at on this tax depreciation table here as percentage a mid-year or a half-year you could also have like a quarter of a year as well so that would it requires a different tax table here so let's go and look at our definitions here so again Maker's depreciation you reference the IRS publications here for determining how you depreciate your asset here for this maker system so a here you have these different options here so for a that's a general depreciation system it's referred to as GDS or you have B here and an alternative depreciation system that would be identified as 80s and then we have two different methods here number one you have the declining balance that would be like for your mid-year in your mid quarter depreciation and number two here you have a straight-line option you have an option to go to the straight-line and that could be like for the mid-year mid quarter or mid month and what do we mean by mid here mid means whatever period the asset is placed in the surface you use the middle date for that period so for example if we're looking for mid-quarter we'd have to identify which quarter say it was the fourth quarter so then we would have October November December and when we mean by mid quarter we be using the middle of the quarter or November 15th as our depreciation date here and then the other item here each item of depreciable property belongs to a property class here define life so what we were talking about before the property class for example a car or truck that's being depreciated it would go into a particular property class here or have a defined life according to our depreciation chart and just looking at what's tied in here so this maker property class we have them say particular property classes here and what they're what's tied into this here the depreciation method depends on the property class so whatever a depreciation method you have depends on particular property class and just showing here in general terms here are say are a three five seven and 10-year property here you use a two hundred percent declining balance here according to the IRS depreciation percentages per their charts here and then for like fifteen and twenty year property you use 150 percent declining balance and then the twenty seven and a half to 39 year property here classification here you use a straight line here and then one last point here the recovery period for most property generally are longer under the 80s option here then they are under the GD s here so let's go back to our table tax percentage table here again this here let's just go over here in a little bit more detail word have the property class remember property classes define by years here like we got three or five.

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