How does Drake Tax calculate depreciation?
Drake Tax uses the tables in the appendix of Publication 946, How to Depreciate Property, for assets with a life of up to 15 years.
If the asset has a life longer than 15 years, or is qualified Indian reservation property, the software calculates the depreciation based on the method prescribed in Publication 946, Chapter 4, Figuring Depreciation Under MACRS.
Exceptions to those calculations are:
- Certain assets placed in service prior to 1981.
- Calculations for assets with a life of 27.5 or 39 years (may vary slightly from the tables).
Note: IRS allows either method and is aware that calculations may vary slightly when not using the tables. Publication 946 observes ”Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables.”
Example: A 39-year asset is placed into service 4/1 of the current year at a cost of $140,000; method of SL with a MM convention. By software calculations the rate is 1.816% and the current depreciation $2,542. Looking at the depreciation table in Publication 946, the rate shows as 1.819% for an asset placed into service in the 4th month, which would give you $2,547 in depreciation.
For more information see Publication 946. The MACRS tables are located in the appendix. Chapter 4 explains how to calculate depreciation both using the tables and without using them.
See the attachment below for examples of figuring depreciation without using the tables.
Why is my depreciation in Drake Software different from what my previous software calculates?
The difference may be the result of:
- selecting X in the Do not use MACRS % tables field.
- using the tables vs. using the calculation method.
- data entry issues (check the date, method, amount, bonus depreciation or other special elections, etc.).
- Fiscal year or short year dates on screen 1.
If an asset is not showing in the Depreciation Listing in view mode, check the 4562 - Item Detail screen to make sure the asset has not exceeded its Life, the Date Acquired is not after the filing year, and that the asset has a form indicated in the FOR box at the top of the screen, as these are some of the more common reasons for the asset to not appear.
Starting in Drake20, the Method drop lists have been re-ordered to assist with more accurate data entry selections.