{"data":{"id":"us-ky/krs-141.0101","jurisdiction":"us-ky","citation":"KRS 141.0101","heading":"Depreciation methods and transitional rules.","body":"(1) (a) The provisions of subsections (2) to (11) of this section shall apply to taxable\nyears beginning before January 1, 1994.\n(b) The provisions of subsections (12) to (15) of this section shall apply to taxable\nyears beginning after December 31, 1993.\n(c) The provisions of subsection (16) of this section apply to property placed in\nservice after September 10, 2001.\n(2) For property placed in service prior to January 1, 1990, in lieu of the depreciation\nand expense deductions allowed under Internal Revenue Code Sections 168 and\n179, a deduction for a reasonable allowance for depreciation, exhaustion, wear and\ntear, and obsolescence of property used in a trade or business shall be allowed and\ncomputed as set out in subsections (3) to (11) of this section. For prop erty placed in\nservice after December 31, 1989, the depreciation and expense deductions allowed\nunder Sections 168 and 179 of the Internal Revenue Code shall be allowed.\n(3) Effective August 1, 1985, \"reasonable allowance\" as used in subsection (2) of this\nsection shall mean depreciation computed in accordance with Section 167 of the\nInternal Revenue Code and related regulations in effect on December 31, 1980, for\nall property placed in service on or after January 1, 1981, except as provided in\nsubsections (6) to (8) of this section.\n(4) Depreciation of property placed in service prior to January 1, 1981, shall be\ncomputed under Section 167 of the Internal Revenue Code, and the method elected\nthereunder at the time the property was first placed in service or  as changed with\nthe approval of the Commissioner of Internal Revenue Service or as required by\nchanges in federal regulations.\n(5) Taxpayers other than corporations shall be allowed to deduct as depreciation on\nrecovery property placed in service before A ugust 1, 1985, an amount calculated\nunder Section 168 of the Internal Revenue Code subject to the provisions of\nsubsections (6) and (8) of this section. Corporations with a taxable year beginning\non or after July 1, 1984, and before August 1, 1985, shall c alculate a deduction for\ndepreciation on recovery property placed in service prior to August 1, 1985, using\neither of the following alternative methods:\n(a) Dividing the total of the deductions allowed under Internal Revenue Code\nSection 168 by one and four tenths (1.4); and\n(b) Calculating the deduction that would be allowed or allowable under the\nprovisions of Section 167 of the Internal Revenue Code.\n(6) Recovery property placed in service on or after January 1, 1981, and before August\n1, 1985, and subject to transition under s ubsection (8) of this section, shall be\nsubject to depreciation under Section 167 of the Internal Revenue Code, restricted\nto the straight line method therein provided over the remaining useful life of such\nassets.\n(7) Depreciation of property placed in se rvice on or after August 1, 1985, shall be\ncomputed under Section 167 of the Internal Revenue Code.\n(8) Transition from Section 168 of the Internal Revenue Code, Accelerated Cost\nRecovery System (ACRS) depreciation, to the depreciation allowed or allowable\nunder this section shall be reported in the first taxable year beginning on or after\nAugust 1, 1985. To implement the transition, the following adjustments shall be\nmade:\n(a) Taxpayers other than corporations shall use the adjusted Kentucky basis for\nproperty placed in service on or after January 1, 1981. \"Adjusted Kentucky\nbasis\" means the basis used for determining depreciation under Section 168 of\nthe Internal Revenue Code less the allowed or allowable depreciation and\nadjustment for election to expense  an asset (Section 179 of the Internal\nRevenue Code);\n(b) Corporations shall adjust the federal unadjusted basis by increasing such basis\nby the ACRS depreciation not allowed as a deduction in determining\nKentucky net income for tax years beginning after June 30, 1984, less allowed\nor allowable ACRS depreciation for federal income tax purposes.\nCorporations will not be permitted to adjust the basis by the ACRS\ndepreciation not allowed for Kentucky income tax purposes in tax years\nbeginning on or before June 30, 1984.\n(9) A taxpayer may elect to treat the cost of property placed in service on or before July\n31, 1985, as an expense as provided in Section 179 of the Internal Revenue Code in\neffect on December 31, 1981, except that the aggregate cost which may b e\nexpensed for corporations shall not exceed five thousand dollars ($5,000). A\ntaxpayer may elect to treat the cost of property placed in service on or after August\n1, 1985, as an expense as provided in Section 179 of the Internal Revenue Code in\neffect on  December 31, 1980. Computations, limitations, definitions, exceptions,\nand other provisions of Section 179 of the Internal Revenue Code and related\nregulations shall be construed to govern the computation of the allowable\ndeduction.\n(10) Upon the sale, ex change, or disposition of any depreciable property placed in\nservice on or after January 1, 1981, capital gains or losses and the amount of\nordinary income determined under the provisions of the Internal Revenue Code\nshall be computed for Kentucky income tax purposes as follows:\n(a) Compute the Kentucky unadjusted basis which is the cost of the asset reduced\nby any basis adjustment made by the taxpayer under Section 48(q)(1) of the\nInternal Revenue Code and any expense allowed and utilized under Section\n179 of the Internal Revenue Code (First Year Expense) in determining\nKentucky net income in prior years, and\n(b) Compute the adjusted basis by subtracting the depreciation allowed or\nallowable for Kentucky income tax purposes from the unadjusted basis,\nexcept corporations will not be permitted to adjust the basis of assets by the\nACRS depreciation not allowed for Kentucky income tax purposes in the tax\nyears beginning on or before June 30, 1984, and\n(c) Compute the gain or loss by subtracting the adjusted basi s from the value\nreceived from the disposition of the depreciable property, and\n(d) Compute the recapture of depreciation required under Sections 1245 through\n1256 of the Internal Revenue Code and related regulations, and\n(e) Unless otherwise provided in t his subsection the provisions of the Internal\nRevenue Code and related regulations governing the determination of capital\ngains or losses shall apply for Kentucky income tax purposes.\n(11) Unless otherwise provided by this chapter, the basis of property pl aced in service\nprior to January 1, 1990, for purposes of Kentucky income tax shall be the basis,\nadjusted or unadjusted, required to be used under Section 167 of the Internal\nRevenue Code in effect on December 31, 1980.\n(12) As used in this subsection to subsection (14) of this section:\n(a) \"Transition property\" means any property placed in service before the first\nday of the first taxable year beginning after December 31, 1993, and owned\nby the taxpayer on the first day of the first taxable year beginning  after\nDecember 31, 1993.\n(b) \"Adjusted Kentucky basis\" means the amount computed in accordance with\nthe provisions of paragraph (b) of subsection (10) of this section for transition\nproperty.\n(c) \"Adjusted federal basis\" means the original cost, or, in the case of Section 338\nproperty, the adjusted grossed-up basis of transition property less:\n1. Any basis adjustments required by the Internal Revenue Code for\ncredits; and\n2. The total accumulated depreciation and election to expense deductions\nallowed or allowable for federal income tax purposes.\n(d) \"Section 338 property\" means property to which an adjusted grossed -up basis\nhas been allocated pursuant to a valid election made by a purchasing\ncorporation under the provisions of Section 338 of the Internal Revenue Code.\n(e) \"Transition amount\" means the net difference between the adjusted Kentucky\nbasis and the adjusted federal basis of all transition property determined as of\nthe first day of the first taxable year beginning after December 31, 1993.\n(13) For taxable years beginning after December 31, 1993, the amounts of depreciation\nand election to expense deductions, allowed or allowable, the basis of assets,\nadjusted or unadjusted, and the gain or loss from the sale or other disposition of\nassets shall be the same for Kentucky income tax purposes as determined under\nChapter 1 of the Internal Revenue Code.\n(14) For taxable years beginning after December 31, 1993, the transition amount\ncomputed in accordance with the provisions of paragraph (e) of subsection (12) of\nthis section shall be reported by the taxpayer as follows:\n(a) In the first taxable year beginning after December 31, 1993, and the eleven\n(11) succeeding taxable years, the taxpayer shall include in gross income one -\ntwelfth (1/12) of the transition amount if:\n1. The adjusted federal basis of transition property exceeds the adjusted\nKentucky basis of transition property;\n2. The transition amount exceeds five million dollars ($5,000,000);\n3. The transition amount includes property for which an election was made\nunder Section 338 of the Internal Revenue Code; and\n4. The taxpayer elects the provisions of this paragraph with the filing of an\namended income tax return for the first taxable year be ginning after\nDecember 31, 1993.\n(b) In the first taxable year beginning after December 31, 1993 and the three (3)\nsucceeding taxable years, if the transition amount exceeds one hundred\nthousand dollars ($100,000), or if the transition amount does not exce ed one\nhundred thousand dollars ($100,000) and the taxpayer elects the provision of\nthis paragraph with the filing of the income tax return for the first taxable year\nbeginning after December 31, 1993, the taxpayer shall:\n1. Deduct from gross income twenty -five percent (25%) of the transition\namount if the adjusted Kentucky basis of transition property exceeds the\nadjusted federal basis of transition property; or\n2. Add to gross income twenty-five percent (25%) of the transition amount\nif the adjusted feder al basis of transition property exceeds the adjusted\nKentucky basis of transition property.\n(c) In the first taxable year beginning after December 31, 1993, if the transition\namount does not exceed one hundred thousand dollars ($100,000) and the\ntaxpayer does not elect the provisions of paragraph (b) of this subsection, the\ntaxpayer shall:\n1. Deduct from gross income the total transition amount if the adjusted\nKentucky basis of transition property exceeds the adjusted federal basis\nof transition property; or\n2. Add to gross income the total transition amount if the adjusted federal\nbasis of transition property exceeds the adjusted Kentucky basis of\ntransition property.\n(15) For taxable years beginning before January 1, 2028, notwithstanding any other\nprovision of this section to the contrary, any qualified farming operation, as defined\nin KRS 141.410, shall be allowed to compute the depreciation deduction for new\nbuildings and equipment purchased to enable participation in a networking project,\nas defined in KRS 141.410, on an accelerated basis at two (2) times the rate that\nwould otherwise be permitted under the provisions of this section. The accumulated\ndepreciation allowed under this subsection shall not exceed the taxpayer's basis in\nsuch property.\n(16) (a) For property placed in service after September 10, 2001, only the depreciation\ndeduction allowed under Section 168 of the Internal Revenue Code in effect\non December 31, 2001, exclusive of any amendments made subsequent to that\ndate, shall be allowed.\n(b) For property placed in service after September 10, 2001, but prior to January\n1, 2020, only the expense deduction allowed under Section 179 of the Internal\nRevenue Code in effect on December 31, 2001, exclusive of any amendments\nmade subsequent to that date, shall be allowed.\n(c) For property placed in service on or after January 1, 2020, only the expense\ndeduction allowed under Section 179 of the Internal Revenue Code in effect\non December 31, 2003, exclusive of any amendments made subsequent to that\ndate, shall be allowed, except that the phase -out provisions of Section 179 of\nthe Internal Revenue Code, limiting the qualifying investment in property,\nshall not apply.","path":["KRS Chapter 141"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57945","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:33Z","sha256":"7410170c1c90fdf53d2499a87264ffa63afc02136951200567134905bf50d25d","source_id":"us-ky","stale":false,"prev":"us-ky/krs-141.010","next":"us-ky/krs-141.0105"},"notice":"GroundRules: Original legal text. Not legal advice."}