Drake Tax - Depreciation Calculation

Article #: 10108

Last Updated: December 05, 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

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 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.

Entries for book depreciation are used as record-keeping entries to track assets within the Fixed Asset Manager. These figures will not appear on the Depreciation Schedule in View mode of the return.

To obtain a report of book depreciation go to Reports > Fixed Asset Manager. Choose from the drop lists:

  • Report type: Depreciation Schedules

  • Depreciation type: Book

  • Style type: either

    • Full Schedule, By Department, By Form/Schedule (1040),

    • By Asset Category

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