On May 5, 2019, Governor Holcomb signed into law Senate Enrolled Act #565 updating numerous tax provisions including updates to both Section 179 and bonus depreciation when property is acquired in a trade.
We now have two separate Section 179 limitations. The Section 179 limit for property acquired in a trade is generally limited to the less of Section 179 claimed on the federal return or taxable income reported on the trade. The $25,000 limit continues to apply to property acquired outside of a trade.
There are also two separate treatments for bonus depreciation. For property acquired in a trade, the bonus amount is generally no longer an add-back on the Indiana tax return to the extent of federal income realized on the trade minus Section 179 claimed. Bonus depreciation is still an add-back on the Indiana tax return if the asset is acquired outside of a trade.
These provisions apply to tax years beginning after December 31, 2017. For calendar year taxpayers, this would mean starting with their 2018 Indiana tax return.
The Indiana Department of Revenue is in the process of updating forms and instructions to reflect these new rules. Further guidance will be issued when they are prepared to process any amended returns you choose to file. Give us a call with any questions you may have.