Connecticut issued guidance on the new changes for the federal bonus depreciation deduction under IRC Sec. 168(k). The changes apply to individuals for tax years beginning as of January 1, 2017.
What Are the Changes to Bonus Depreciation?
The Tax Cuts and Jobs Act (TCJA) increased the federal bonus depreciation deduction to 100% for property placed in service after September 27, 2017. Connecticut taxpayers who claim the federal deduction must include that amount on their Connecticut returns. However, taxpayers may subtract 25% of the addback amount over the next four tax years.
What Is the Impact to 2017 Returns?
Taxpayers must report the bonus depreciation addition on their 2017 Connecticut tax returns. Those returns are:
- resident income tax returns (Form CT-1040);
- nonresident and part-year resident income tax returns (Form CT-1040NR/PY); and
- S corporation and partnership composite income tax returns. (Form CT-1065/CT-1120SI)
What if a Taxpayer Already Filed a 2017 Return?
Taxpayers who already filed a 2017 return must file an amended return to report the addition.
What if a Taxpayer Underpaid Tax Due to the Bonus Depreciation Addback?
Taxpayers who underpaid their tax as a direct result of the new addback should contact the Department of Revenue Services. A taxpayer and the DRS can explore options to avoid the application of interest and a penalty.
The taxpayer must send a written explanation of why the addback led to an underpayment by December 31, 2018. The explanation must include all supporting documentation.
Office of the Commissioner Guidance OCG-5, Connecticut Department of Revenue Services, June 14, 2018, ¶401-868