Cost Segregation by State: OBBBA Conformity in All 50 States

OBBBA (Public Law 119-21) reinstated permanent 100% bonus depreciation at the federal level. State conformity is a different question. Some states automatically follow federal (rolling conformity). Others require taxpayers to add back federal bonus depreciation and depreciate the property on state rules. Each state page explains the treatment, the relevant statutes or guidance, and the practical workaround.

Frequently asked questions

Which states decouple from OBBBA bonus depreciation?

Fifteen states fully decouple from IRC Section 168(k): California, Florida, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, and Wisconsin. Taxpayers add back federal bonus depreciation and depreciate on state MACRS rules. The federal 100% first-year deduction is preserved; only the state deduction is reduced.

Which states have rolling conformity to federal bonus depreciation?

Approximately half of income-tax states use rolling conformity: they automatically follow the current Internal Revenue Code, including Section 168(k). Rolling-conformity states pass OBBBA's 100% bonus through to the state tax return with no addback. Colorado, Illinois, Kansas, Missouri, and Utah are examples. The states hub page lists all rolling-conformity states with the statute citation.

Do states without income tax matter for cost segregation?

The seven no-income-tax states (AK, FL, NV, SD, TN, TX, WY) plus Washington and New Hampshire (which taxes only investment income) make cost segregation a pure federal benefit for property owned there. The federal 100% bonus depreciation under OBBBA delivers the full first-year deduction. Florida decouples on the corporate side but has no personal income tax, so individuals see full federal benefit.

What is the addback-then-deduction mechanic?

In addback-mechanic states like Indiana, Maine, and Wisconsin, the taxpayer adds back federal bonus depreciation in year one and deducts the difference over the state depreciation life (5, 7, 15, or 27.5 years). Net state deduction over the full period equals the federal amount. Cash flow is delayed but total state deduction is preserved. Track the state basis separately from federal basis.

Which is the best state for cost segregation on a rental property?

Texas and Florida for full federal benefit with zero state income tax. Colorado, Illinois, and Missouri for full federal-plus-state benefit under rolling conformity. Avoid California, New Jersey, and Massachusetts for state-level benefit; the federal deduction is preserved. The state conformity tracker at /regulatory/state-conformity/ lists the deduction impact per $100K of reclassified basis.

How does state conformity affect the study fee return on investment?

State conformity affects the total tax savings but not the study fee itself. In a rolling-conformity state at 5% marginal state rate, a $250K reclassification saves $12,500 in state tax in year one on top of $92,500 in federal tax (37% marginal). In a decoupled state, the year-one savings drop to $92,500 federal only. The $2,495 fee still pays back in both cases.

Which states have expanded conformity beyond federal?

Colorado allows first-year expensing of certain property beyond federal Section 179. Iowa provides an expanded state-level deduction on qualified property. Oregon conforms to Section 168(k) and additionally allows certain 168(n) Qualified Production Property treatment. The expanded-conformity states are listed at /states/ under the Expanded conformity category with statute citations.