North Carolina did not adopt the additional firstyear depreciation provisions in the federal
Jobs Creation and Worker Assistance Act of 2002 or the federal Jobs and Growth Tax Relief Reconciliation Act of 2003. Instead, you were required to add back on the State return for 2002, 2003, and 2004 a certain percentage of the first-year depreciation claimed on the federal return for the applicable year. Any amount of additional first-year depreciation added to federal taxable income on your 2002, 2003, or 2004 State return may
be deducted in five equal installments beginning with the tax return for 2005. Therefore, determine the total amount of firstyear depreciation added back on your 2002, 2003, and 2004 State returns and enter 20% of the total on Line 45.
Example: An individual added back the following amounts of additional first-year depreciation on Line 36 of the State returns over the three previous tax years:
2002 - $4,000
2003 - $2,000
2004 - $6,000
Total $12,000
The individual may deduct $2,400 ($12,000 x .20) on the 2005 return and $2,400 on each return for the succeeding four tax years.
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