Drake Tax - Depreciation Calculation

Article #: 10108

Last Updated: November 04, 2024

 


Tags: Drake Tax

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Overview

Drake Tax uses the tables in the appendix of Publication 946 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.

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  The 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.

FAQs

Manual Calculation

Use the PDF Manual Depreciation Calculation for detailed examples.

*Pre-1981 Methods

On the 4562 screen, the following depreciation methods were available in Drake Tax 2023 and prior.

  • D - 125% Declining Balance - pre-1981

  • DS - 125% Declining Balance with SL Switch - pre-1981

  • DB - 150% Declining Balance - pre-1981

  • DBS - 150% Declining Balance with SL Switch - pre-1981

  • DC - 175% Declining Balance - pre-1981

  • DCS - 175% Declining balance with SL Switch - pre-1981

  • DD - 200% Declining Balance - pre-1981

  • DDS - 200% Declining balance with SL switch - pre-1981

Starting with Drake Tax 2024, these methods are not available in data entry as they are no longer applicable. If you update a return from the prior year with one of the above methods selected for an asset, the following occurs:

  • The Method drop list is updated to the corresponding post-1981 method and flagged for review.

    Important  You will have to verify that the selected method is correct to clear the flag and e-file the return.

  • A note is produced in View/Print mode to explain that the method was changed.

Prior-year Method Method Selected (must be verified)
D SL
DB ALT
DBS ALT
DC SL
DCS SL
DD M
DDS M
DS SL
SYD SL