Performing a 168 Allowance Switch

See 168 Allowance % field for legislative changes that outline the percentages available for the applicable periods.

Note: The 168 Extra feature allows you to use a 168 Allowance % not valid for federal purposes for assets placed in service in years 2023 and later.

You are required to take the additional 168 Allowance when applicable, unless you elect out of it. You can elect out of the additional depreciation on a year-to-year basis for each class of assets (that is, 3-year property, 5-year property, 7-year property, etc.).

You can select a group of assets and change the depreciation method for the group to apply the additional 20%, 30%, 40%, 50%, 60%, 80%, or 100% allowance to the group. Alternatively, you can change the group's depreciation methods so that no additional allowance is taken.

The depreciation method is changed for only those assets that qualify for the switch. For more information, see Assets That Qualify for the 168 Allowance Switch.

Before you use this feature, you should spend some time planning and creating your asset groups. Remember that you elect the 168 Allowance for entire classes of assets (3-year property, 5-year property, etc.). Your asset group could include multiple classes of property, as long as you include all of the qualifying assets for each class in the group. Also, make sure that groups for which you are applying the "Plus 168" depreciation methods consist of assets that are eligible for the additional depreciation.

You may also want to reset depreciation on your assets to the placed-in-service date before you use this feature, especially if your assets contain beginning depreciation amounts. If you want to retain the information in the beginning depreciation fields, then reset depreciation to the Beginning Date instead.

The table below shows how the depreciation methods are switched. The depreciation methods in the left column do not take the 168 Allowance. The depreciation methods in the right column do take the 168 Allowance.

Depr Methods with No 168 Allowance		Depr Methods with 168 Allowance
MF200	MACRS Formula 200	MA200	MACRS Formula 200 Plus 168
MF150	MACRS Formula 150	MA150	MACRS Formula 150 Plus 168
MF100	MACRS Formula 100	MA100	MACRS Formula 100 Plus 168
MI200	MACRS Indian Reservation 200*	MR200	MACRS Indian Reserv. Plus 168*
MI150	MACRS Indian Reservation 150*	MR150	MACRS Indian Reserv. Plus 168*
MI100	MACRS Indian Reservation 100*	MI100	MACRS Indian Reserv. Plus 168*
AD	ADS Straight-line MACRS	AA	ADS Straight-line MACRS Plus 168
SF	Straight-line full month	SB	Straight-line full month Plus 168

*See MACRS Method MI and MACRS Method MR.

 

For example, suppose Asset A currently uses depreciation method MF200. You create a group of assets called "7-year MACRS Property" that includes Asset A. If you perform a 168 Allowance Switch on this group of assets, then Asset A will use depreciation method MA200.

The depreciation methods are changed as indicated in the table above. The depreciation method of an asset that has a custom depreciation method is not changed.

Note: If you switch an asset that uses a MACRS Table depreciation method, a MACRS Formula Plus 168 depreciation method is applied. For example, suppose you switch an asset with an MT200 depreciation method to MA200. However, you cannot switch an asset back to a MACRS Table method. For example, an asset with an MA200 depreciation method switches to MF200, even if that asset once used depreciation method MT200. To change the depreciation method back to MT200, you must edit the Depreciation Method field in Asset Detail. For more information, see Changing the Depreciation Method of a Single Asset.

To perform the 168 Allowance Switch

1. Create a group consisting of one or more classes of assets for which you want to change depreciation methods.

2. Select Depreciate/168 Allowance Switch from the menu bar. The 168 Allowance Switch window appears.

3. Complete the 168 Allowance Switch window, and then select OK.

The depreciation methods are changed for the selected group of assets that qualify for the change. The 30%, 40%, 50%, or 100% allowance percentage is applied if you elect to take the 168 Allowance. Depreciation is calculated through the Current Through Date using the new depreciation methods. Any gain or loss on disposed assets is also recalculated.

Note: The depreciation methods are changed for only those assets that qualify for the 168 allowance switch. For example, the switch is not performed on assets involved in a transfer. An error message appears if you attempt to switch an asset that has an incorrect estimated life or a business use percentage below 51%. However, an error message is not displayed if you attempt to switch an asset involved in a transfer.