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 Florida comes in.
2. Florida and federal bonus depreciation
Florida has no individual income tax, so for individuals and pass-through owners (LLCs, partnerships, S corps) there is no state return and federal 100% bonus depreciation from a cost segregation study faces no state-level adjustment whatsoever. For C corporations subject to Florida's 5.5% corporate income tax, Florida decouples from bonus: its 2026 conformity bill (HB 7031, ch. 2026-137, signed June 11, 2026) adopts the IRC as of January 1, 2026 but specifically retains IRC 168(k) as in effect January 1, 2025, i.e. without OBBBA's permanent 100% bonus, so corporate taxpayers recompute federal taxable income on a pro forma return under the pre-OBBBA phase-down (40% for 2025, 20% for 2026 placed-in-service). On top of that, s. 220.13(1)(e), F.S. requires adding back any 168(k) bonus actually deducted for assets placed in service before January 1, 2027, recovered via a 1/7 annual subtraction over seven years.
C corporations only: add back the s. 168(k) bonus deduction (computed under pre-OBBBA law) for assets placed in service before January 1, 2027; subtract one-seventh of the addback each year for seven years, beginning with the taxable year of the addback (s. 220.13(1)(e), F.S.). Individuals/pass-throughs: no Florida income tax, no addback.
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
Florida levies no individual income tax, so the federal deduction above is the whole story for individual owners and pass-through investors.
Model your own numbers with the tax strategy projector.
3. Section 179 in Florida
Florida Section 179 cap: Pre-OBBBA federal limits for C corps (approx. $1,250,000 limit / $3,130,000 phaseout for 2025, as under IRC in effect 1/1/2025); no cap applies to individuals since there is no personal income tax.
Irrelevant to individuals and pass-through owners because Florida has no personal income tax. For C corporations, Florida historically conformed fully to Section 179 with no addback, but the 2026 conformity bill freezes Section 179 at the IRC as in effect January 1, 2025, decoupling from OBBBA's increase to a $2.5M limit / $4M phaseout. Corporate taxpayers must recompute Florida taxable income using the pre-OBBBA inflation-adjusted limits (about $1.25M expensing limit with a roughly $3.13M phaseout threshold for 2025) via a pro forma federal return attached to Form F-1120. Amounts allowed within those pre-OBBBA caps are deducted in full with no addback or spread.
4. Does it still help in Florida?
Yes, fully. For individuals and pass-throughs there is no Florida income tax, so 100% of the federal cost seg benefit is kept with zero state friction; even for C corporations, Florida piggybacks federal taxable income and follows regular MACRS recovery periods (5/7/15/27.5/39-year), so reclassifying components into shorter lives still accelerates Florida deductions, with only the bonus portion added back and recovered over 7 years.
- •Florida's Constitution (Art. VII, s. 5) prohibits a personal income tax, so the typical real estate investor holding property individually or through an LLC/partnership/S corp files no Florida income tax return at all; cost seg and 100% federal bonus flow through untouched.
- •Only entities taxed as C corporations pay Florida's 5.5% corporate income tax, and they face both a pre-OBBBA 168(k) recomputation (40% bonus in 2025, 20% in 2026) and the s. 220.13(1)(e) addback with 1/7-per-year recovery over 7 years, for assets placed in service before January 1, 2027.
- •HB 7031 (ch. 2026-137, L.O.F., signed June 11, 2026) adopts the IRC as of January 1, 2026 but freezes 168(k), 179, 163(j), 174(a), and 274 at their January 1, 2025 pre-OBBBA versions and excludes new IRC 168(n) (qualified production property) and 174A entirely; the Revenue Estimating Conference pegged full OBBBA conformity at a $3.484B revenue hit, which is why Florida decoupled.
- •Qualified improvement property quirk for C corps: s. 220.13(1)(e) also requires adding back ALL federally deducted QIP depreciation (regular or bonus) for QIP placed in service on or after January 1, 2018, with a subtraction computed under the pre-CARES Act IRC (i.e. 39-year life), a trap for corporate owners of commercial interiors.
- •Affected C corps must attach a pro forma recomputed federal return to Form F-1120; the DOR's TIP 26C01-01 (July 7, 2026) says taxpayers who already filed on a different basis should amend on Form F-1120X and the Department will work to resolve resulting penalties.
- •Florida previously capped corporate Section 179 at $128,000 with a spread-back (pre-2015); it then conformed fully until the 2026 bill re-decoupled from OBBBA's $2.5M cap, so published state-conformity tables dated before mid-2026 may show Florida as fully conforming to 179.
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.