How to Change from MACRS to ADS

In election year 2018, I am trying to reclassify assets from MACRS (31.5 years) to ADS (40 years). The "current through date" 12/2017. At that time, the asset has been depreciating for 27.16 years, and would be depreciating for another 4.3 there were no change to the method. When I change the critical fields from MF (31.5) to AD (40), it should now be depreciating for an additional 12.875 years. However, Sage is calculating too much depreciation, and causing the asset to be fully depreciated in about 6 years. 

Any advice? Is there something I'm missing in the settings for AD SL 40 years that is causing this to depreciate earlier than the 40 year mark? 

  • Use the depreciation method RM, instead of method AD.  The RM and RH methods were added to the product specifically for the type of change you want to make. Both methods calculate straight-line depreciation over the remaining life, using the remaining value as of your change date, 12/2017, in this case. RM applies the mid-month averaging convention, which is required for real property. RH uses the half-year convention.

  • I tried this, but in addition to changing from MACRS to straight line, the remaining life is also changing from 31.5 to 40 years. Changing to RM allows me to calculate SL through the 31.5th year, but I need to calculate SL through the 40th year.

  • Hi taxacct,

    In addition to changing the method to RM, also change the Estimated Life to 40 years.

    Both RH and RM are MACRS methods for purposes of U.S. tax depreciation compliance, as are methods AA and AD. 

    You may be aware of the following feature already.  Both the Depreciation Method and Estimated Life can be changed with the Bulk Edit tool (Depreciation > Bulk Edit). The tool allows the change of multiple assets and books at the same time.

    A screenshot appears below. You may need to click on the image to view it clearly. 

  • Thank you, that worked!

    I have another question regarding assets that I am electing ADS for, but had taken bonus depreciation in prior years. For example, I have an asset that was placed in service in 2017 and had 50% bonus depreciation. When changing the method to ADS-40yr, how can I maintain the bonus depreciation that was already taken in 2017? I have tried a few methods in Sage and all seem to wipe out the bonus depreciation, and thus my prior accumulated depreciation is off.

  • Hi taxacct,

    When applying the RM and RH methods, bonus depreciation is not included in the beginning fields.  Instead, the Beginning Accum field will only show the current accumulated depreciation through the current through date sans any bonus you may have taken on the asset..

    Therefore, I recommend that before you change the method, make a note of the number in the 168 Allowance Amount field (this is just below the Current Through Date in the Detail view of the asset record).  Then after changing the depreciation method, add that number to the amount entered in the Beginning Accum field.