Custom Depreciation Methods and Short Years

During a short tax year, the system determines the annual depreciation by multiplying the annual percentage in the custom method table by the depreciable basis. This amount is further reduced by the short-year fraction (the number of months in the short year divided by 12). The system divides the short-year amount equally among the months in the short tax year.

Using the Custom Depreciation Method example , assume the company had a short tax year because its business began in June 2020. The calculations must be modified to take into account the short year. First-year depreciation would equal 7/12ths of the annual amount (June to December). The balance would be recovered in the year following the last scheduled recovery period.

Taking into account the short tax year, the percentage for each year would yield these results:

Year	Calculation	Depreciation
1	$17,000 x 14.58% x 7/12	$ 1,445.85
2	$17,000 x 38%	6,460.00
3	$17,000 x 37%	6,290.00
4	$17,000 x 10.42%	1,771.40
5	$17,000 x 14.58% x 5/12	1,032.75
	Total	$17,000.00