Tax Credits

Tax methods such as ACRS and MACRS determine which tax credits are available in PeopleSoft Asset Management. When you specify a Qualified Investment Code, PeopleSoft Asset Management uses this code to determine which tax credits apply to your assets. If you fail to specify a Qualified Investment Code for any reason, PeopleSoft Asset Management deduces the applicable code from the tax method that you elect.

If you do not specify a tax system, PeopleSoft Asset Management considers the date that the assets were placed in service to determine which method applies. Based on the tax method that you select and the recovery life, PeopleSoft Asset Management derives the corresponding qualified investment code and the tax credits that available under that code, and elects the applicable tax credits for you.

If a Basis Reduction Percentage applies, the depreciable basis of the asset is reduced. The calculation is based on the Qualified Investment Code, the Tax Credit, and the Basis Reduction Percentage.

Calculating Tax Credits

PeopleSoft Asset Management uses the Qualified Investment Code, together with the Recovery Life and in-service date, to determine the Qualified Investment Percentage—the rate that is applied to the book cost— to determine the amount that qualifies for tax credits.

The Tax Credit Percentage is derived from the Tax Credit Type, Tax Credit Code, Recovery Life, and in-service date.

The amount of the tax credit is based on the following calculations:

Book Cost x Qualified Investment Percentage = Amount qualifying for the tax credit

Amount qualifying x Tax Credit Percentage = Amount of tax credit

Cost Basis Reduction

After the amount of the tax credit is calculated, a corresponding reduction in the basis is calculated as required:

Amount of tax credit x Basis Reduction Percentage = Amount the basis will be reduced

If you dispose of the asset before it has completely depreciated, PeopleSoft Asset Management calculates the recapture of the credit and adds it to the depreciable cost basis.

Section 179 Expense

If you elect to expense all or a portion of the cost, you should select the Section 179 Expense Taken check box on the Asset Book Definition - Tax page. Investment credits are automatically calculated based on the criteria that you enter in the Asset Book Definition - Tax Credit page.