1. What a cost segregation study does
A building normally depreciates over 27.5 years (residential) or 39 years (commercial). A cost segregation study breaks the purchase price apart and reclassifies components like flooring, cabinetry, dedicated electrical, and land improvements into 5, 7, and 15-year property, so a large slice of the basis depreciates on much shorter schedules.
On the federal return, that reclassified property also qualifies for bonus depreciation, which restores a 100% first-year write-off for qualifying property acquired and placed in service after January 19, 2025. States set their own rules, which is where Delaware comes in.
2. Delaware and federal bonus depreciation
Delaware is a rolling-conformity state and historically allowed federal bonus depreciation in full, but HB 255 (signed Nov 19, 2025, in a special session) temporarily decouples from OBBBA's permanent 100% bonus. For INDIVIDUAL income tax, the decoupling applies to property placed in service after December 31, 2025: Delaware follows pre-OBBBA TCJA rules, so 2025 placed-in-service property still gets 100% bonus on the Delaware return, 2026 property gets 20%, and 2027-2030 property gets 0% bonus (regular MACRS only). For CORPORATE income tax the decoupling starts earlier, with property placed in service after January 19, 2025 (40% bonus in 2025, 20% in 2026, 0% for 2027-2030). The decoupling sunsets for property placed in service after December 31, 2030, when Delaware re-adopts the federal 100% rules.
No multi-year percentage addback like MN/NC. Delaware instead requires depreciation for affected property to be computed under the federal rules in effect immediately before OBBBA (the TCJA phase-down: 40%/20%/0%), per 30 Del. C. sec. 1106(d) (PIT) and sec. 1903(d) (CIT). The disallowed federal bonus is effectively added back and recovered through regular MACRS depreciation over the asset's remaining recovery period, with a Delaware-specific basis/depreciation schedule tracked until the 2030 sunset.
Worked example
A $1,000,000 building, with and without a study
Illustrative only. A residential rental purchased for $1,000,000 of building basis (land excluded), acquired and placed in service after January 19, 2025.
Building basis
$1,000,000
Reclassified to 5, 7, and 15-year property (25%)
$250,000
Federal first-year deduction at 100% bonus
$250,000
Year 1 on that $250,000 without a study (27.5-year straight line)
about $9,100
Delaware allows only part of the federal bonus deduction. No multi-year percentage addback like MN/NC. Delaware instead requires depreciation for affected property to be computed under the federal rules in effect immediately before OBBBA (the TCJA phase-down: 40%/20%/0%), per 30 Del. C. sec. 1106(d) (PIT) and sec. 1903(d) (CIT). The disallowed federal bonus is effectively added back and recovered through regular MACRS depreciation over the asset's remaining recovery period, with a Delaware-specific basis/depreciation schedule tracked until the 2030 sunset.
Model your own numbers with the tax strategy projector.
3. Section 179 in Delaware
HB 255 did not touch Section 179. Under Delaware's rolling conformity, the full federal Section 179 regime flows through unchanged, including the OBBBA-increased $2.5 million expensing cap and $4 million phase-out threshold (indexed) for property placed in service after 2024. There is no Delaware-specific 179 cap or addback for either individual or corporate returns.
4. Does it still help in Delaware?
Yes. Delaware starts from federal AGI and fully follows MACRS recovery periods, so reclassifying building components into 5/7/15-year lives still front-loads deductions on the Delaware return even in the 0%-bonus years (2027-2030), and 2026 reclassified assets still pick up 20% Delaware bonus on top of shortened lives.
- •Delaware was a pure rolling-conformity state with no bonus addback until HB 255 (Nov 19, 2025), passed in a special legislative session to plug an estimated ~$400M OBBBA revenue hole (projected savings of $328M through FY2028).
- •Asymmetric effective dates: corporations lose 100% bonus for property placed in service after Jan 19, 2025, but individuals (including real estate investors with pass-through or Schedule E property) keep full 100% bonus for everything placed in service through Dec 31, 2025. A cost seg on a property placed in service in 2025 gets the full federal result on the 2025 Delaware individual return.
- •The Delaware phase-down mirrors pre-OBBBA TCJA law: 40% (2025, corporate only), 20% (2026), 0% (2027 and later), rather than a flat disallowance-plus-addback mechanism.
- •Hard sunset: for property placed in service after December 31, 2030, Delaware automatically re-conforms to the federal 100% bonus rules (DOR TIM 2025-2).
- •HB 255 also decouples from IRC 168(n) 100% special depreciation for Qualified Production Property (same dates/sunset) and, for corporations only, from OBBBA's retroactive catch-up of 2022-2024 capitalized R&E under Section 174A; Delaware conforms to current R&E expensing from 2025 forward.
- •Section 179 fully conforms with no state cap, so for 2027-2030 property, 179 expensing (where eligible, e.g., qualified real property and personal property in an active trade or business) becomes the main state-level acceleration tool for Delaware taxpayers.
- •Official guidance is Delaware Division of Revenue Technical Information Memorandum 2025-2 (Dec 23, 2025); statutory citations are 30 Del. C. sec. 1106(d) (personal) and sec. 1903(d) (corporate).
5. The exit: recapture and timing
The accelerated deductions come back into view when you sell. Gain attributable to the 5, 7, and 15-year property is Section 1245 recapture, taxed at ordinary rates, and the straight-line depreciation on the building itself is unrecaptured Section 1250 gain, taxed at up to 25%. A study does not create that bill, it moves deductions forward, but the timing of the sale decides how much of the benefit you keep.
Two levers manage the exit. A 1031 exchange defers both flavors of recapture along with the rest of the gain, and simply holding the property lets the time value of the early deductions do its work; most owners want a 3 to 5 year horizon before a taxable sale for the math to stay comfortably positive. Model the exit before you commission the study, not after.