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 Louisiana comes in.
2. Louisiana and federal bonus depreciation
Louisiana fully conforms to IRC 168(k) bonus depreciation for both individual and corporate income tax. The individual return (IT-540) starts with federal AGI and the corporate return with federal taxable income under rolling IRC conformity, and the state has never enacted a bonus-depreciation addback, so the OBBBA's permanent 100% bonus for property acquired after January 19, 2025 flows through to the Louisiana return automatically. On top of federal conformity, Act 11 of the 2024 Third Extraordinary Session (effective for tax years beginning on or after January 1, 2025) created Louisiana's own permanent elective 100% full expensing at R.S. 47:297.25 (individuals/pass-throughs) and R.S. 47:287.744 (corporations), using the 168(k)/168(e)(6) definitions as in effect January 1, 2024, with an anti-duplication rule so the state election cannot double up a deduction already taken federally. The 2025-2026 sessions made no decoupling change; LDR's 2025 IT-540 instructions confirm no federal-bonus addback for taxpayers who do not use the state election.
No addback for federal 168(k) bonus itself. An addback exists only for taxpayers who elect Louisiana's own full-expensing under R.S. 47:297.25/287.744: in the election year the excess of 100% state expensing over federal depreciation is reported as exempt income (Schedule E Code 32E, Form R-90158 attached), and in each later year the taxpayer adds back the federal depreciation claimed on that same property (IT-540 Schedule E, Line 2E) since it was already fully expensed on the Louisiana return.
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
Louisiana conforms to federal bonus depreciation, so the state return mirrors the $250,000 first-year deduction.
Model your own numbers with the tax strategy projector.
3. Section 179 in Louisiana
Louisiana starts from federal AGI (individuals) / federal taxable income (corporations) with rolling IRC conformity and has no Section 179 modification or state-specific cap, so the full federal limits, including the OBBBA-increased $2.5 million cap with $4 million phase-out for 2025, flow through to the Louisiana return.
4. Does it still help in Louisiana?
Yes, completely. Louisiana follows federal MACRS recovery periods (5/7/15/27.5/39-year) and federal bonus with no modification, so a cost segregation study produces the identical first-year deduction on the Louisiana return that it does federally, taxed at the flat 3% individual rate.
- •Louisiana is one of the minority of states that fully conforms to federal 100% bonus depreciation, and post-OBBBA it is doubly protected: even if federal bonus ever phased down again, Act 11 of 2024 gives Louisiana its own permanent elective 100% full expensing (R.S. 47:297.25 individual, R.S. 47:287.744 corporate) for tax years beginning on or after January 1, 2025.
- •The state election still has a live use case: property placed in service in 2025 but acquired under a binding contract before January 20, 2025 gets only 40% federal bonus under the pre-OBBBA phase-down, yet qualifies for 100% expensing on the Louisiana return via the election (definitions pinned to IRC as in effect January 1, 2024).
- •Electing Louisiana full expensing triggers its own bookkeeping: exempt-income Code 32E with Form R-90158 (Bonus Depreciation Schedule) in year 1, then an annual Schedule E Line 2E addback of the federal depreciation claimed on the same property in later years.
- •Act 11 also allows elective immediate deduction of Section 174 research and experimental expenditures at the state level (bonus amortization), paralleling the OBBBA's federal fix.
- •The 2024 reform package replaced graduated individual rates with a flat 3% (TY2025+), nearly tripled the standard deduction to $12,500/$25,000, set a flat 5.5% corporate income tax, and repealed the corporate franchise tax effective January 1, 2026, so the absolute state-tax value of a cost seg deduction is about 3 cents per dollar for individuals.
- •Louisiana's filing deadline is May 15 (not April 15) for calendar-year individual returns, with an automatic extension to November 16, 2026 for 2025 returns.
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.