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 Missouri comes in.
2. Missouri and federal bonus depreciation
Missouri is a rolling-conformity state: RSMo 143.091 adopts the Internal Revenue Code 'as the same may be or become effective, at any time or from time to time, for the taxable year,' so the state automatically picked up OBBBA's permanent 100% bonus depreciation for property acquired after January 19, 2025. No addback is required for either individual or corporate taxpayers; Missouri taxable income starts from federal AGI (individuals) or federal taxable income (corporations) with the federal 168(k) deduction intact. The only decoupling in Missouri history is a narrow legacy addback under RSMo 143.121 for bonus depreciation on property purchased July 1, 2002 through June 30, 2003, which is irrelevant to current acquisitions. Nothing in the 2025-2026 legislative sessions decoupled from 168(k); the major 2025 change (HB 594) went the other direction, exempting capital gains.
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
Missouri 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 Missouri
Missouri follows the federal Section 179 deduction and limits in full through rolling conformity, including the OBBBA increase to a $2.5 million cap with a $4 million phase-out threshold (indexed) for 2025. No Missouri addback, recovery schedule, or separate state election exists.
4. Does it still help in Missouri?
Yes, and in Missouri it works at full strength: because the state conforms to both MACRS recovery periods and 100% bonus, every dollar of 5/7/15-year property identified in a cost segregation study is deducted on the Missouri return in the same year as the federal return, with no separate state depreciation schedule to track.
- •Missouri became the first state to fully exempt capital gains from individual income tax: HB 594 (signed July 10, 2025) lets individuals deduct 100% of income reported as capital gain on the federal return, retroactive to tax years beginning on or after January 1, 2025. For real estate investors this means Section 1231 gain and unrecaptured Section 1250 gain on a property sale (reported as capital gain federally) generally escape Missouri tax, while Section 1245 ordinary recapture triggered by cost-seg-reclassified personal property remains taxable as ordinary income. This asymmetry makes cost seg + bonus unusually attractive in Missouri: deductions reduce ordinary income now, and much of the eventual sale gain can be Missouri-tax-free.
- •HB 594 includes a corporate trigger: if the top individual rate falls to 4.5% or lower, corporations get the same 100% capital gains deduction the following year.
- •The only bonus depreciation addback in Missouri law (RSMo 143.121) applies solely to property purchased July 1, 2002 through June 30, 2003, a legacy of the 2002 Job Creation and Worker Assistance Act; the Missouri DOR FAQ confirms property purchased outside that window 'does not qualify for the modification.'
- •Missouri's top individual rate is 4.7% for 2025 with scheduled trigger-based cuts, and the corporate rate is 4%, so state-side savings per dollar of bonus deduction are modest compared to high-tax states, but conformity means zero extra compliance work (no dual depreciation schedules).
- •Because Missouri starts from federal AGI and makes no depreciation modification, federal and Missouri basis stay identical; there is no state-specific gain recomputation on sale like in decoupled states.
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.