Bonus Depreciation, Section 199, and Federal Deductions for State Extensions

With less than two weeks to go, now is the time to be thinking extensions as I wrote in yesterday’s article. However today’s article about extensions is dealing with business extension and the Federal deductions that are added back to determine State Taxable Income–namely Partnerships, LLCs, and Schedule C’s. Some states have a March 15th deadline for business income tax returns and other states have a April 15th deadline.  The next podcast will be on how to determine the State taxable Income for  business extensions.  There are several differences when it comes to business and personal extensions. Differences include how the states treat depreciation and several other federal deductions.  State Taxable Income does not always equal Federal Taxable Income.


While some states follow the federal bonus depreciation rules, many do not.  In those states that do not follow the federal bonus depreciation, the difference between the state depreciation and the federal depreciation is added back to taxable income.

Additionally, many states do not allow the state tax deductions including the franchise tax.    Section 199 production deduction is also not allowed in many states.

These are just a few of the deductions that are added back to state taxable income.  An important aspect to remember is that if you have these deductions listed above, be sure to add them back to the Federal Taxable Income.  Don’t be caught owing additional tax after when you file your return after filing an extension because you miss the Federal Deductions that many states require be added back to determine your State Taxable Income..

If you need help with filing an extension, please contact me or your tax preparer for more information.

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