Section 179 of the Internal Revenue Code (IRC) allows business owners to treat the cost of certain qualifying property as an expense for the year the property is placed in service. For taxable years beginning after December 31, 2013, the amount of the sec. 179 expense deduction is generally the same for federal and Wisconsin tax purposes.
Because claiming a sec. 179 expense deduction is an election under the IRC, a business owner may elect to claim a different amount of sec. 179 expense for Wisconsin than is claimed for federal tax purposes. The amount claimed for Wisconsin must still meet all the requirements of sec. 179.
Either of the following two reporting methods may be used to claim a different election for Wisconsin and federal tax purposes.
Prepare a pro forma federal return based on the election chosen for Wisconsin.
Persons who file
paper returns: Attach the federal pro forma return to the Wisconsin Form 1 or 1NPR instead of the actual return filed for federal tax purposes.
Persons who file
electronic returns: A separate transmission will need to be made to the IRS and Wisconsin. The federal return submitted with the Wisconsin Form 1 or 1NPR should be a pro forma return instead of the actual return filed for federal tax purposes.
Make the election using Wisconsin Schedule I,
Adjustments to Convert 2014 Federal Adjusted Gross Income and Itemized Deductions to the Amounts Allowable for Wisconsin.
On line 5 of Schedule I, fill in "Different sec. 179 election" as a description. In Col. I, enter as a negative number the amount of sec. 179 expense claimed on your actual federal return. In Col. II, enter as a negative number the amount of sec. 179 expense you are electing to claim for Wisconsin. Treating the amounts as positive numbers, if the amount in Col. I is larger than the amount in Col. II, enter the difference as a positive number in Col. III. If the amount in Col. II is larger than the amount in Col. I, enter the difference as a negative number in Col. III.
When completing Schedule I, be sure to also adjust any other items on your federal return that are affected by the sec. 179 election. For example, if you claim less sec. 179 expense, this would also affect the amount of depreciation allowed and your depreciation deduction should also be adjusted and shown as a separate item on line 5 of Schedule I. In addition, a change in your federal adjusted gross income (FAGI) would also affect itemized deductions that are limited by FAGI. See Part II of Schedule I.
March 2, 2015