The federal American Recovery and Reinvestment Act of 2009 extended the 50% bonus depreciation available to certain property an additional year [see Economic Stimulus Act of 2008 below], through December 31, 2009. North Carolina law did not adopt the bonus depreciation provisions under IRC sections 168(k) or 168(n). Therefore, if you deducted the 50% bonus depreciation under IRC sections 168(k) or 168(n) on your 2009 federal return, you must add to federal taxable income 85% of the amount deducted. The amount added to federal taxable income should be entered on line 40 of your 2009 Form D-400. This adjustment does not result in a difference in basis of the affected assets for State and federal income tax purposes.

Note: Any amount of the bonus depreciation added to federal taxable income on your 2009 State return may be deducted in five equal installments over your first five taxable years beginning with the tax return for taxable year 2010.

The federal Economic Stimulus Act of 2008 allows the 50 percent bonus depreciation (special accelerated depreciation) to certain property acquired and placed in service on or after January 1, 2008, and before January 1, 2009. North Carolina law did not adopt the bonus depreciation provision. Therefore, if you deducted 50 percent additional first-year depreciation on your 2008 federal return, you must add to federal taxable income 85 percent of the amount deducted. Also, an addition to federal taxable income is required on your 2008 State return for 85% of any additional first-year depreciation deducted on your 2007 fiscal year federal return for property acquired and placed in service on or after January 1, 2008. Therefore, if you claimed the bonus depreciation deduction on your federal return, the amount you must add back should be shown on Line 38 of your 2008 Form D-400. This adjustment does not result in a difference in basis of the affected assets for State and federal income tax purposes.

Note: Any amount of the additional first-year depreciation added to federal taxable income on your 2008 State return may be deducted in five equal installments over your first five taxable years beginning with the tax return for taxable year 2009.

Last modified on: 12/18/09 08:28:02 AM.