Bonus depreciation is a federal rule. IRC section 168(k) lets you deduct a large share of 5, 7, and 15 year property in year 1, and the One Big Beautiful Bill Act (July 2025) made the rate a permanent 100% for qualified property acquired after January 19, 2025. Property acquired on or before that date keeps the old phase-down: 80% for 2023 placements, 60% for 2024, and 40% for property placed in service in 2025. None of that binds the states. Each state writes its own conformity statute, and bonus depreciation is the provision states decouple from most often.
The 3 conformity patterns
- Rolling conformity states adopt the IRC as it changes and generally allow bonus unless they carve it out.
- Static conformity states adopt the IRC as of a fixed date, so a federal change like OBBBA does not apply until the legislature updates that date.
- Selective decoupling states follow federal taxable income but add back specific provisions, almost always IRC 168(k).
Examples of states that decouple
- California allows no bonus depreciation at all and caps its own Section 179 deduction at $25,000, far below the federal $2,500,000 cap with its $4,000,000 phase-out under OBBBA. The adjustments run through FTB Form 3885A.
- Indiana has decoupled from bonus depreciation since 2002. You add the bonus back and recover it over the asset's regular life, per Indiana Information Bulletin #118.
- Florida piggybacks federal corporate taxable income but requires bonus to be added back and subtracted over the following 7 years under Florida Statutes section 220.13. Florida has no personal income tax, so individual investors are unaffected.
- New York, New Jersey, Massachusetts, Minnesota, and Pennsylvania also block or limit bonus for most taxpayers.
Conformity changes almost every legislative session, so confirm the current statute for each state where you file before modeling a specific year.
What decoupling means mechanically
A nonconforming state makes you keep a second depreciation schedule. In year 1 you add the federal bonus back to state income. In later years you subtract state depreciation computed without bonus. Over the asset's life the totals converge, and until they do your state basis differs from federal basis, which also changes state gain when you sell.
Why cost segregation still works in nonconforming states
Decoupling blocks the bonus rate, not the reclassification. The 5, 7, and 15 year MACRS lives that a cost segregation study assigns under IRS Pub 946 generally carry into state calculations. A component moved from a 39 year life to a 5 year life still deducts dramatically faster for state purposes; the benefit is simply spread over 5 years instead of landing in year 1.
How Amadae handles the state layer
Amadae's cost segregation screen models the federal benefit and flags the state addback for each state where you file. The screen is a modeling estimate, not an engineering study. When the numbers justify it, Amadae coordinates with an engineering study firm, prepares the Form 3115 catch-up if a look-back applies, and files federal and state returns with both depreciation schedules carried correctly.