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A bill passed disallowing the new federal bonus depreciation for Rhode Island tax purposes. When filing a Rhode Island tax return any bonus depreciation taken for federal purposes must be added back to income as a modification on Schedule 1, line 23B for Rhode Island purposes. In subsequent years, when federal depreciation is less than what previously would have been allowed, the difference may be deducted from income as a modification on Schedule 1, line 24B for Rhode Island purposes.
A separate schedule of depreciation must be kept for Rhode Island purposes. The gain or loss on the sale or other disposition of the asset is to be determined, for Rhode Island purposes, using the Rhode Island depreciation schedule. EXAMPLE: A company bought equipment after September 11, 2001 that cost $10,000 and had a 10 year life and qualified for 30% bonus depreciation. Depreciation for federal purposes in the first year was $3,700 (30% X $10,000 + 10% x 7,000). Normal depreciation in the first year would have been $1,000. The Company should add back on Schedule I, line 23b of RI-1040 the amount of $2,700 ($3,700 - $1,000). The company should write on line 23b the words Bonus Depreciation Adjustment. In subsequent years the company should deduct $300 ($1000 - $700) each year while depreciation lasts. The deduction should be on line 24b of RI-1040 and they should write in the words Bonus Depreciation Adjustment. If a taxpayer has already filed a return, a form RI- 1040X should be filed. Questions on this procedure should be addressed by calling the Personal Income Tax Section at (401) 222-3911
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