The taxpayer should receive the calculation for the deductible amount from the contractor who installed the Energy Efficient Equipment. The calculation must be completed using a specific government approved software package.  

Note: This solution applies to Corporations, S Corporations and Partnerships.

If Trade or Business:

1. Go to Income/Deductions > Business.
• Select Section 7 - Other Depreciation and Amortization.
• Enter the appropriate information in columns titled Description, Date in Service, Method, and Life/Rate.
• On the line titled Cost/Other Basis, right click, select List.
• In the first row, enter the description in the 'Description' column and the pre-deduction cost in the 'Amount' column.
• In the second row, enter your description of the energy efficiency and the deduction (as a negative number).
• Click OK to close the list. The box titled Cost/Other Basis will populate.
2. Go to Income/Deductions > Business.
• Select Section 10 - Other Deductions.
• In the column titled Description - line 4, enter the description of the Section 179(D) expense (and the Asset number).
• In the column titled Total Amount - line 4, enter the calculated Special Deduction for Sec 179(D). If there are Schedule  M-3 adjustments associated with this item, enter the appropriate amounts in columns titled
• Temporary Difference, Permanent Difference, Book (See Help) and Type.
3. Calculate the return.

 

If this is a rental activity:

1. Go to Income/Deductions > Rent and Royalty.
• Select Section 4 - Depreciation and Amortization.
• Enter the appropriate information in columns titled Description, Date in Service, Method, and Life/Rate.
• On the line titled Cost/Other Basis, right click, select List.
• In the first row, enter the description in the 'Description' column and the pre-deduction cost in the 'Amount' column.
• In the second row, enter your description of the energy efficiency and the deduction (as a negative number).
• Click OK to close the list. The box titled Cost/Other Basis will populate.
2. Go to Income/Deductions > Rent and Royalty.
• Select Section 3 -  Expenses.
• In line 21 - Other Expenses, enter to record the deduction information.
• Note: If there are Schedule M-3 adjustments associated with this item, enter the appropriate amounts in columns titled Temporary Difference, Permanent Difference, Book (See Guide) and M-3 Code.
3. Calculate the return.

 

If this is a farm activity:

1. Go to Income/Deductions > Farm/4835.
• Select Section 4 - Depreciation and Amortization.
• Enter the appropriate information in columns titled Description, Date in Service, Method, and Life/Rate.
• On the line titled Cost/Other Basis, right click, select List.
• In the first row, enter the description in the 'Description' column and the pre-deduction cost in the 'Amount' column.
• In the second row, enter your description of the energy efficiency and the deduction (as a negative number).
• Click OK to close the list. The box titled Cost/Other Basis will populate.
2. Go to Income/Deductions > Farm/4835.
• Select Section 3 - Expenses.
• In line 32 - Other Expenses, enter to record the deduction information.
3. Calculate the return.

 

Note: The depreciable basis is reduced by the Sec. 179D deduction and the Sec. 179D deduction doesn't go to the Form 4562. A separate entry should be made on the appropriate entity type (i.e.: trade or business, rental, or farm) as an Other Expense.