Cost Segregation in Georgia

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 Georgia comes in.

2. Georgia and federal bonus depreciation

Georgia has never adopted IRC 168(k) bonus depreciation in any form (30%, 50%, or 100%), and its 2026 conformity bill (HB 1199) expressly continued that decoupling after the OBBBA made 100% bonus permanent federally for property acquired after January 19, 2025. The treatment is the same for individual and corporate taxpayers: any bonus claimed federally must be added back and Georgia depreciation recomputed without bonus on a separate Georgia Form 4562. The 2025 Georgia Form 4562 marks the special depreciation allowance lines (Part II line 14 and Part V line 25) 'Not allowed for Georgia purposes,' and the form header states Georgia does not allow additional depreciation benefits of IRC 168(k), 1400L, 1400N(d)(1) and certain other provisions. Georgia also declined to adopt related bonus-style provisions: 168(m) reuse/recycling, 168(n) disaster bonus, the $8,000 bonus bump to the passenger-auto cap, and OBBBA's Section 174A immediate R&E expensing.

Not a fixed-percentage addback like Minnesota. The taxpayer attaches the federal Form 4562, adds back the federal depreciation difference on the 'other additions' line of the Georgia return, then completes a separate Georgia Form 4562 computing regular MACRS depreciation (no 168(k)) and takes it on the 'other subtractions' line. The disallowed bonus is recovered over each asset's normal MACRS recovery period via the Georgia-only schedule; lifetime depreciation is identical, only timing differs.

3. Section 179 in Georgia

Georgia adopts the federal Section 179 dollar limits year by year through its conformity bills and the 2025 Georgia Form 4562 carries the post-OBBBA federal amounts: $2,500,000 maximum deduction and $4,000,000 phaseout threshold (prior years tracked federal too: $1,220,000/$3,050,000 for 2024). Two carve-outs: Georgia has not adopted Section 179 for certain real property under IRC 179(d)(1)(B)(ii) (the qualified-real-property election covering roofs, HVAC, fire/alarm/security systems in nonresidential buildings) and has not adopted the 179(e) definition of qualified real property for certain taxpayers. The Part I business income limitation must also be recomputed for Georgia by adjusting for federal changes Georgia has not adopted.

4. Does it still help in Georgia?

Yes. Georgia's own Form 4562 Part III mirrors federal MACRS exactly (3/5/7/10/15/20/25-year classes, 27.5-year residential rental, 39-year nonresidential real, same conventions and methods), so a cost segregation study that reclassifies building components into 5-, 7-, and 15-year property still accelerates Georgia depreciation substantially versus 27.5/39-year straight-line; the investor just loses the year-one 100% bonus write-off on the state return and takes those shorter-life assets over their regular MACRS schedules instead.

• •Georgia updates its IRC conformity date annually; HB 1199 (signed March 20, 2026) moved it to January 1, 2026 for tax years beginning on or after January 1, 2025, so OBBBA is incorporated except for the provisions Georgia expressly decouples from.
• •Georgia has decoupled from 168(k) bonus continuously since the provision's 2002 debut, so the no-bonus addback is a permanent planning fact, not a temporary suspension.
• •Georgia requires a parallel depreciation system: federal Form 4562 attached, full federal/state difference added back, and a separate Georgia Form 4562 computed without bonus; software handles it, but state depreciation schedules diverge from federal for decades on a cost-segregated building.
• •Georgia adopted the OBBBA-sized Section 179 limits ($2.5M/$4M for 2025), making 179 the main year-one expensing tool on the Georgia return, but 179 generally cannot be used on residential rental building components the way bonus can, and Georgia excludes the 179(d)(1)(B)(ii) qualified-real-property category (roofs, HVAC, etc.).
• •Georgia did not adopt the $8,000 bonus bump to the luxury-auto depreciation cap, the 5-year life for new farm equipment (168(e)(3)(B)(vii)), Section 174A R&E expensing, or OBBBA's 163(j) changes.
• •Georgia kept its $10,000 SALT-deduction cap for itemizers rather than adopting the federal $40,000 OBBBA cap, and did not adopt the tips/overtime/car-loan-interest deductions.
• •Georgia's individual income tax is now a flat tax (5.19% for 2025, trending toward 4.99% under scheduled cuts), so the stakes of the bonus addback are roughly a nickel per dollar of timing difference.

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.