Bonus Depreciation
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FEDERAL BONUS DEPRECIATION

In a special session held in September 2004, the Iowa Legislature passed legislation to couple with the additional 50% first-year depreciation allowance (bonus depreciation) for assets placed in service after May 5, 2003, but before January 1, 2005. In addition, this law also coupled with the increase in Section 179 expensing allowance from $25,000 to $100,000 for tax years beginning on or after January 1, 2003 ($102,000 for 2004). These provisions were provided in the federal Jobs and Growth Tax Relief Reconciliation Act of 2003.

Previously, the Iowa Legislature had decided not to adopt these provisions in Iowa law. For taxpayers who have filed a tax return which reflected either the disallowance of 50% bonus depreciation or the disallowance of the increased Section 179 expensing, amended returns must be filed to reflect this change.

Iowa continues to decouple with the 30% bonus depreciation provision set forth in the federal Job Creation and Worker Assistance Act of 2002. Form IA4562A will still need to be filed for any assets placed in service after September 10, 2001, but before May 6, 2003, to account for the difference in depreciation.

For Tax Year 2004

Form IA 4562A should be used to compute Iowa depreciation on items where Federal bonus depreciation was claimed. The total adjustment for decoupling should be entered on line 14. See line 14 for more information.

To Amend Tax Year 2003

Form 2003 IA4562A has been updated to reflect this change. You should not use the 2003 IA4562A version that had the section 179 columns with an April 04 date in the lower right-hand corner. You may use the 2003 IA4562A version that has a June 03 date in the lower right hand corner.

The Expanded Instructions for 2003 Line 14 have been updated as well.