1.300
1.300 Accelerated Deductions from Gross Income
Tax Expenditure Name
Tax Expenditure Number
FY2020
FY2021
FY2022
FY2023
FY2024
Accelerated Deductions from Gross Income
1.300
120.8
106.8
95.8
97.2
84.2
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Tax Item
Description
Origin
FY2024
1.301
Modified Accelerated Depreciation on Rental Housing
Modified Accelerated Depreciation on Rental Housing
Landlords and investors in rental housing may use accelerated methods of depreciation for new and used rental housing. Rental housing placed in service after 1988 is depreciated on a straight-line basis over a 27.5-year period. Rental housing placed in service before 1988 was depreciable over shorter periods (generally 19 or 20 years), and, instead of straight-line depreciation, the 175% declining balance method was permitted. Straight-line depreciation over the property's expected useful life is the generally accepted method for recovering the cost of building structures. The excess of allowable depreciation over such generally accepted depreciation is a tax expenditure, resulting in a deferral of tax or an interest-free loan.
21.8
1.303
Modified Accelerated Depreciation on Buildings (other than Rental Housing)
Modified Accelerated Depreciation on Buildings (other than Rental Housing)
In general, businesses may recover the cost of durable business assets only by capitalizing the cost and claiming depreciation deductions over a period of years. This expenditure reflects Massachusetts' conformity with federal rules allowing for accelerated depreciation of nonresidential buildings.
3.0
1.304
Modified Accelerated Cost Recovery System (MACRS) for Equipment
Modified Accelerated Cost Recovery System (MACRS) for Equipment
In general, businesses may recover the cost of durable business assets only by capitalizing the cost and claiming depreciation deductions over a period of years. Traditional financial accounting rules required the cost to be recovered pro rata over a set number of years. However, Massachusetts conforms to the Modified Accelerated Cost Recovery System (MACRS) set out in the Internal Revenue Code (the "Code"). MACRS allows more of the cost of the property to be deducted in the first few years of an asset's life, and relatively less later. MACRS also allows taxpayers to choose an alternative depreciation method that more closely conforms to traditional financial accounting rules. The use of the accelerated method instead of the alternative method results in a temporary reduction of tax in the earlier years of an asset's life, which constitutes a tax expenditure. The deferral of tax is analogous to an interest-free loan from the Commonwealth to taxpayers.
11.6
1.305
Expense Deduction for First-Year Business Assets
Expense Deduction for First-Year Business Assets
Under the Internal Revenue Code (the "Code"), businesses may recover the cost of durable business assets only by capitalizing the cost and claiming depreciation deductions over a period of years. The Code adopts different depreciation schedules for specified classes of assets. Massachusetts follows the federal depreciation rules, with modifications. Code § 179 allows federal taxpayers to elect to claim an immediate expense deduction in the tax year during which the asset was first placed in service. Due to its conformity to the Code for determining business expense deductions, Massachusetts allows the Code § 179 deduction in the same amount as it is allowed for federal tax purposes. The tax expenditure is a result of such conformity. The immediate deduction of the cost of business assets constitutes a tax expenditure because it results in a deferral of tax.
46.1
1.308
Expensing Exploration and Development Costs
Expensing Exploration and Development Costs
Individuals or investors in extractive industries (mining or drilling natural resources) may take an immediate deduction for certain exploration and development costs. For a more detailed description of this tax expenditure, see corporate excise item 2.309; the provisions for individual taxpayers are somewhat more liberal than those that apply to corporations.
Code §§ 193, 263(c), 616, 617; M.G.L. c. 63, §
30.4.
30.4.
Negligible
1.309
Expensing Research and Experimental Expenditures in One Year
Expensing Research and Experimental Expenditures in One Year
Prior to tax year 2022, for federal purposes
taxpayers could elect to immediately deduct
research and experimental expenditures that
they would otherwise have had to capitalize
and deduct over a period of 5 years. Starting
with tax year 2022 all expenditures for
research conducted in the U.S must be
capitalized and deducted over 5 years.
Expenditures incurred outside the U.S. must be
capitalized and deducted over 15 years.
Massachusetts generally conforms to the
federal rules for deducting research and
experimental expenditures. This conformity
resulted in a Massachusetts tax expenditure for
tax years prior to 2022.
taxpayers could elect to immediately deduct
research and experimental expenditures that
they would otherwise have had to capitalize
and deduct over a period of 5 years. Starting
with tax year 2022 all expenditures for
research conducted in the U.S must be
capitalized and deducted over 5 years.
Expenditures incurred outside the U.S. must be
capitalized and deducted over 15 years.
Massachusetts generally conforms to the
federal rules for deducting research and
experimental expenditures. This conformity
resulted in a Massachusetts tax expenditure for
tax years prior to 2022.
0.0
1.312
Expensing Certain Capital Outlays of Farmers
Expensing Certain Capital Outlays of Farmers
Farmers may use certain favorable accounting rules. For instance, they may use the cash basis method of accounting and may deduct up to 50% of non-paid farming expenses as current expenses even though these expenditures are for inventories on hand at the end of the year. They also may deduct certain capital outlays, such as expenses for fertilizers and soil and water conservation if they are consistent with a federal- or state-approved plan. Generally, these special rules are not available to farming corporations and syndicates.
0.5
1.313
Expenditures to remove architectural and transportation barriers to the handicapped and elderly
Expenditures to remove architectural and transportation barriers to the handicapped and elderly
Massachusetts conforms to Internal Revenue Code ("Code") § 190, which allows taxpayers to elect an immediate deduction of up to $15,000 of expenses incurred in removing architectural or transportation barriers to the handicapped and elderly. The cost of an improvement to a business asset is normally a capital expense, which would normally have to be capitalized and deducted over a period of years. The accelerated deduction applies to the first $15,000 of expenses. Costs over that amount must be capitalized and deducted under the generally applicable depreciation schedules set out in the Code.
Expenses eligible for the deduction include costs incurred in making a building or public transportation vehicle more accessible to people with disabilities and the elderly. Examples with regard to buildings include installing ramps, widening doors, modifying restrooms, and lowering counters to accommodate customers in wheelchairs. Examples with regard to vehicles include installing lifts for wheelchairs and modifying signage and public address systems to accommodate the visually or hearing impaired. The deduction is not available for costs incurred in completely renovating a building or vehicle or to the cost of replacing depreciable property in the normal course of business.
The immediate deduction of eligible expenses results in a deferral of tax. The deferral constitutes a Massachusetts tax expenditure.
Expenses eligible for the deduction include costs incurred in making a building or public transportation vehicle more accessible to people with disabilities and the elderly. Examples with regard to buildings include installing ramps, widening doors, modifying restrooms, and lowering counters to accommodate customers in wheelchairs. Examples with regard to vehicles include installing lifts for wheelchairs and modifying signage and public address systems to accommodate the visually or hearing impaired. The deduction is not available for costs incurred in completely renovating a building or vehicle or to the cost of replacing depreciable property in the normal course of business.
The immediate deduction of eligible expenses results in a deferral of tax. The deferral constitutes a Massachusetts tax expenditure.
IRC §190; M.G.L. c. 63, §30.4
0.3
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