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How do I calculate my Ohio depreciation addback?

The amount of the addback depends on a few different circumstances.  First, the taxpayer must compute the amount of federal depreciation subject to addback. The amount subject to the addback is the taxpayer’s total §179 expense less \$25,000 plus all of the taxpayer’s §168(k) depreciation expense. This includes depreciation from their own business, as well as their proportionate share of depreciation from any pass-through entity in which the taxpayer is an investor.

Note: The calculation of the amount subject to addback is separate and distinct for each person.  As such, the amount added back on an investor’s return might vary from the amount added back by a pass-through entity on its return.

Then, the amount subject to the addback is multiplied by one of the following fractions:

• 6/6 if the taxpayer, in the year of the depreciation expense, had a federal net operating loss (NOL);
• 2/3 if the business, in the year of the depreciation expense, increased its Ohio employer withholding by at least 10% over the previous year; or
• 5/6 for all other taxpayers.

Example 1:  Mark has \$125,000 of §179 depreciation expense and \$80,000 of §168(k) depreciation expense included in his federal adjusted gross income for the current tax year.  The §179 depreciation is from his sole proprietorship, while the §168(k) depreciation is from his 100% ownership in ABC LLC.  Mark’s total amount of depreciation subject to addback is calculated as:

• Depreciation subject to addback: (§179 - 25,000) + §168k
• Mark’s depreciation subject to addback: (\$125,000 – 25,000) + \$80,000 = \$180,000

Neither Mark nor ABC LLC have a federal NOL or any changes to their Ohio employer withholding amounts.  Thus, Mark would calculate his deprecation addback as:

• Mark’s total depreciation addback: 5/6 x \$180,000 = \$150,000

Example 2: Mark still has \$180,000 subject to addback for the current tax year. However, ABC LLC increased its Ohio employer withholding for its employees by at least 10% over its Ohio employer withholding for the previous tax year. Mark must use a different addback fraction for each source of depreciation, and thus would calculate his deprecation addback as:

• Mark’s addback from ABC LLC: 2/3 x \$80,000 = \$53,333
• Mark’s addback from his sole proprietorship: 5/6 x (\$125,000 – 25,000) = 5/6 x \$100,000 = \$83,333
• Mark’s total depreciation addback: \$53,333 + 83,333 = \$136,666

Example 3: Mark still has \$180,000 subject to addback for the current tax year, but his federal adjusted gross income is -\$100,000 (i.e. Mark has a federal NOL). Mark would calculate his depreciation addback as:

• Mark’s total depreciation addback: 6/6 x \$180,000 = \$180,000

See R.C. 5747.01(A)(20).


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