The 50% bonus depreciation of aircraft purchased after May 5, 2003 and placed in service before January 1, 2005 allowed at the federal income tax level has not been recognized by all states. Taxpayers taking advantage of the bonus depreciation will need to check the laws of their particular state to determine whether their state has chosen to follow the bonus depreciation rules. In states that do not follow/recognize the bonus depreciation schedule, business owners must keep two sets of records for any assets being depreciated under the bonus depreciation schedule.
Wisconsin and Iowa are two Midwest states that do not recognize the bonus depreciation. Although Illinois also does not recognize the bonus depreciation, in Illinois a taxpayer does not need to keep separate records. In Minnesota, taxpayers also do not need to keep a separate set of records. However, Minnesota taxpayers will need to add back 80% of the bonus depreciation claimed, but then they may deduct the portion added back in equal parts over the next five years.
If you live in Wisconsin, Illinois, Minnesota or Iowa, you will need to determine the appropriate steps necessary to comply with the tax laws of your state.