Form 3885 - Corporation Depreciation and Amortization
An Overview of FTB Form 3885 (Corporation Depreciation and Amortization)
- Updated November 07, 2024 - 2.00 PM - Admin, Tax990
Form FTB 3885, Corporation Depreciation and Amortization, to calculate California depreciation and amortization deduction for corporations, including partnerships and limited liability companies (LLCs) classified as corporations.
Nonprofits that obtained tax exemption from the state of California (Franchise Tax Board) must attach Form 3885 with Form CA-199 (California Exempt Organization Annual Information Return) if they're reporting depreciation or amortization expenses for assets.
In this article, we'll explore everything you need to know about Form 3885 and how to complete it.
Table of Contents
What information is needed to complete FTB 3885?
To complete FTB Form 3885, you require the following information.
Basic information about your organization.
Election to expense certain property
Depreciation and election of the first-year depreciation deduction
Details regarding amortization
How to complete FTB Form 3885?
Form 3885 consists of four parts requiring details regarding depreciation and amortization. Here are the step-by-step instructions to complete FTB Form 3885.
Basic Information About Your Organization
Here, you need to enter the basic details of your organization, including the corporation name and California corporation number.
Part I - Election To Expense Certain Property Under Section 179
This section allows corporations to deduct the cost of certain assets as an expense (Section 179 deduction) instead of depreciating them over time.
What is IRS Section 179?
The IRS Section 179 enables business taxpayers to deduct the cost of specific properties as an expense at the time the property is first put into service.
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Line 1:
Enter the maximum Section 179 deduction limit for California ($25,000 for this example).
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Line 2:
Enter the total cost of all Section 179 property placed in service during the year.
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Line 3:
Enter threshold costs from Section 179 property that would reduce your limitation.
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Line 4:
Determine reduction in limitation by subtracting Line 3 from Line 2.
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Line 5:
Determine the dollar limitation for the taxable year by subtracting line 4 from line 1.
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Line 6:
Describe each property, enter its cost (business use only) and elected cost.
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Line 7:
Add all the costs listed on Line 6 and enter the total here.
In the below lines, you need to compute certain values, which include:
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Line 8:
Total elected cost of IRC section 179 property - Add amounts in column (c) of lines 6 and 7.
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Line 9:
Tentative deduction - Enter the smaller of line 5 or line 8.
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Line 10:
Include the carryover of disallowed deduction from prior taxable years.
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Line 11:
Business income limitation - Enter the smaller of business income if it is not less than zero or line 5.
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Line 12:
IRC Section 179 expense deduction - Add lines 9 and 10, which should not exceed line 11.
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Line 13:
Carryover of disallowed deduction to 2024 - Add lines 9 and 10, subtract line 12.
Part II - Depreciation and Election of Additional First-Year Depreciation Deduction Under R&TC Section 24356
This part comprises a table which elaborates on the details of depreciation and additional first-year depreciation deduction under R&TC section 24356.
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Line 14:
You need to enter the details of the depreciation, including
(a) Description of property
(b) Date of acquisition
(c) Cost or other basis
(d) Depreciation allowed or allowable in earlier years
(e) Depreciation method
(f) Life or rate
(g) Depreciation for this year
(h) Additional first-year depreciation
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Line 15:
Add all the amounts in column (g) and column (h) and determine the total of column (h), which should not exceed $2,000. Enter the determined values in the appropriate columns of this line.
Part III - Summary
Here, you need to enter the summary of depreciation amounts, which includes,
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Line 16:
Enter the total if any one of the following is applicable:
- Add lines 12 and 15 of column (g) to determine the expense of IRC Section 179
- Add columns (g) and (h) of line 15
- Enter the amount from line 15, column (g)
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Line 17:
Enter the total depreciation claimed from the IRS Form 4562.
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Line 18:
Determine and enter the depreciation amount if applicable.
Part IV - Amortization
This is the final part of the form requiring the details regarding amortization.
What is Amortization?
Amortization refers to the gradual decline in the value of business intangible assets over a period of time.
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Line 19:
This comprises a table where you have to enter the amortization details, which include,
(a) Description of property
(b) Date of acquisition
(c) Cost or other basis
(d) Amortization allowed or allowable in earlier years
(e) R&TC Section
(f) Period or percentage
(g) Amortization for this year
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Line 20:
Add the amounts in column (g) of line 19 and enter the total
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Line 21:
Enter the total amortization claimed from IRS Form 4562 line 44
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Line 22:
Determine and enter the amortization adjustment if applicable.
Tax990 supports the inclusion of Form 3885 with CA Form 199 filings!
Tax 990, an FTB-approved e-file provider, offers a streamlined solution to prepare and e-file your CA-199 returns. With our cloud-based solution, you can seamlessly include 3885 along with your CA Form 199 return at no additional cost.
With our Form-Based filing option, you can enter the required data directly on your CA Form 199 & attach 3885.
Our Internal Audit system reviews your completed form for any errors to ensure accurate returns.
In case of any issues, you can get in touch with our Dedicated Support Team for instant solutions.
You can invite your organization’s board members to review and approve your form using our Reviewers and Approvers feature.