The mismatch
Bonus depreciation is a federal provision. States decide independently whether to conform, and a substantial number do not — requiring an addback of federal bonus depreciation and a separate state depreciation schedule that recovers the basis over the normal MACRS life.
What that means practically
Two schedules for the same asset. The federal return takes 100% in year one; the state return takes the addback in year one and then a subtraction over subsequent years. Over the full recovery period the totals converge, but the cash flows differ substantially and the compliance burden is real.
Common patterns
Full conformity: the state simply follows federal, and the study benefit is the same at both levels.
Full decoupling: bonus is added back entirely and depreciation follows MACRS without bonus.
Partial decoupling: some states allow a fraction, or cap the addback, or conform to section 179 but not to 168(k).
No income tax: the question does not arise at the state level at all, which is part of why owners in those states see the headline number as the real number.
Section 179 often fares better
Many states that decouple from bonus do conform to section 179, sometimes with their own lower dollar limits. Where that is the case, electing 179 on some assets may produce a materially better combined federal and state result even though the federal deduction is identical.
Multi-state owners
If you file in several states, the analysis multiplies. A portfolio spanning six states may face six different treatments of the same reclassification. This does not defeat a study — the federal benefit is usually the dominant number — but it changes the total and it changes the compliance work.
What we do
Every study includes conformity notes for the states you file in, so your preparer knows where addbacks are required before the return is built rather than during review. Confirm current-year positions with your preparer; conformity rules change with state legislative sessions.
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