State Tax Considerations for Bonus Depreciation and Section 179 Expensing

While federal tax rules for bonus depreciation and Section 179 expensing are generous, state tax laws often differ. Understanding these differences can help you avoid surprises at tax time.

How States Handle Bonus Depreciation

• Many states do not conform to federal bonus depreciation rules.

• Some states require businesses to add back the bonus depreciation amount and depreciate over a standard schedule.
  

How States Handle Section 179 Expensing

• Most states conform to federal Section 179 limits.

• A few states impose lower caps, reducing the immediate deduction.
  

A company in California takes $500,000 in bonus depreciation on federal taxes but must adjust to a slower depreciation schedule for state taxes, impacting cash flow planning.

Strategies to Navigate State Rules

1. Review your state’s tax conformity rules annually.

2. Consider the long-term impact of slower depreciation on state taxes.

3. Work with a tax advisor to align federal and state strategies.
   

How Arc&Ledger Can Help We stay up-to-date on state tax laws to help you maximize savings and maintain compliance. Contact us today for personalized advice.