Bonus Depreciation by State: Who Follows 100% in 2026

Quick Answer: On your federal return, 100% bonus depreciation is permanent for property acquired after January 19, 2025. Your state return is a different story. As of October 2026, 15 states allow the full 100% bonus for individual and pass-through rental owners (Mississippi only if you elect it), 9 have no personal income tax, and 26 don’t fully follow it: 24 make you add some or all of the bonus back and recover it over later years, through regular depreciation or a set formula, and 2 (Delaware and Michigan) allow only the old 20%. In most states that tax income, the cost segregation benefit on the state return arrives gradually instead of all in year one. It usually isn’t lost, just slower, though moving out of the state or changing how you own the property before it’s recovered can cost you part of it. Recent changes: Oregon stopped following federal bonus for 2026 property, Delaware cut 2026 property to 20%, and Arizona updated its law so individual owners now get the full bonus.

If you’ve read anything about cost segregation lately, you’ve probably seen the headline number: 100% bonus depreciation, permanent, thanks to the One Big Beautiful Bill Act. That’s true on your federal return.

But every state decides for itself whether to follow federal depreciation rules, and most states with an income tax don’t follow this one. If you own a rental in one of those states, or live in one, your CPA will be running two depreciation schedules: one for the IRS and one for the state.

We checked the current law in all 50 states. Here’s where each one stands for property placed in service in 2026.

What “doesn’t follow bonus” actually means

When a state decouples from federal bonus depreciation, you usually don’t lose the deduction, as long as you’re still filing in that state while it’s recovered. You lose the timing.

On your federal return, the 5-, 7-, and 15-year property a cost segregation study identifies (furniture, fixtures, some finishes, landscaping, site work) can generally be deducted in the first year, if you acquired the property after January 19, 2025. Whether that deduction actually lowers this year’s tax depends on the passive loss rules, which your CPA applies. A decoupled state makes you add that bonus back to your state income, then gives it back to you over the following years, either through regular depreciation on a separate state schedule or through a set formula. Connecticut, for example, has you add back 100% in year one and then deduct 25% of it in each of the next four years. Minnesota adds back 80% and spreads it over five years.

So in a decoupled state, the first-year state benefit shrinks, but the total depreciation over the life of the assets is the same. Since federal rates are much higher than state rates, the federal deduction is still where most of the value of a study sits.

The 50-state table

This reflects the rules for an individual, LLC, partnership, or S corporation owner of rental property placed in service in 2026. Click any state for the full details, including its specific statute and how the addback is recovered. C corporations often follow different rules.

State	2026 treatment for a rental owner
Alabama	Follows. Full federal bonus carries to the Alabama return.
Alaska	No income tax. No personal income tax return to adjust.
Arizona	Follows. Add back federal depreciation, then subtract the same bonus-inclusive amount. Net: full bonus. C corporations differ.
Arkansas	Adds back. No bonus. Regular MACRS on the state return.
California	Adds back. No bonus ever. Regular depreciation on the state return; Section 179 capped at $25,000.
Colorado	Follows. Rolling conformity. A 2026 bill to decouple died.
Connecticut	Adds back. Add back 100% in year one, then deduct 25% a year for four years.
Delaware	Partial. 2026 property gets only the old 20% bonus; add back the rest.
Florida	No income tax. No personal income tax. Only C corporations adjust.
Georgia	Adds back. No bonus. Separate Georgia depreciation schedule.
Hawaii	Adds back. No bonus. Normal 5, 7, and 15-year lives on the state return.
Idaho	Adds back. Add back and recover through regular MACRS.
Illinois	Adds back. Add back, then subtract regular depreciation until recovered.
Indiana	Adds back. Add back, then recover in later years as if no bonus were taken.
Iowa	Follows. Rolling conformity, no addback.
Kansas	Follows. Starts from federal AGI, no addback.
Kentucky	Adds back. Depreciation frozen at 2001 rules, no bonus.
Louisiana	Follows. Starts from federal AGI, no addback.
Maine	Adds back. Add back, then subtract over later years.
Maryland	Adds back. Add back on Form 500DM, then recover through later subtractions.
Massachusetts	Adds back. No bonus. Regular MACRS on the state return.
Michigan	Partial. Only the old 20% bonus for 2026 property; the difference is added back.
Minnesota	Adds back. Add back 80% in year one, deduct it over the next five years.
Mississippi	Follows. Its own 100% bonus, but only if you elect it on a timely filed return.
Missouri	Follows. Follows federal rules automatically.
Montana	Follows. Starts from federal taxable income, no addback.
Nebraska	Follows. Follows federal law automatically.
Nevada	No income tax. No personal income tax.
New Hampshire	No income tax. But a rental grossing over $109,000 files the Business Profits Tax, which disallows bonus.
New Jersey	Adds back. No bonus. Regular depreciation on the state return.
New Mexico	Follows. Starts from federal AGI. A 2027 addback applies only to C corporations.
New York	Adds back. Add back and use regular depreciation on Form IT-398.
North Carolina	Adds back. Add back 85% in year one, deduct 20% of it a year for five years.
North Dakota	Follows. Follows the Internal Revenue Code as amended.
Ohio	Adds back. Add back five-sixths, deduct it over the next five years. If bonus creates a federal NOL, add back all of it and deduct it over six years.
Oklahoma	Follows. Rolling conformity, plus an optional state expensing election.
Oregon	Adds back. New for 2026: add back and use regular depreciation instead.
Pennsylvania	Adds back. Personal income tax never allows bonus. Regular MACRS.
Rhode Island	Adds back. Add back, then deduct over later years on a state schedule.
South Carolina	Adds back. Add back the excess, regular depreciation in later years.
South Dakota	No income tax. No personal income tax.
Tennessee	No income tax. No tax on individuals’ rental income, but most LLCs and LPs owe excise tax, which allows only 20% bonus for 2026 acquisitions.
Texas	No income tax. No personal income tax. The franchise tax rarely reaches rental owners.
Utah	Follows. Starts from federal AGI, no addback.
Vermont	Adds back. Add back the excess, subtract it over the assets’ normal lives.
Virginia	Adds back. Add back, then regular depreciation. Also skips the higher federal Section 179 limits.
Washington	No income tax. None for 2026. A 9.9% tax on income over $1 million is set to start in 2028; a repeal is on the November 3 ballot.
West Virginia	Follows. Follows the full federal bonus. Its 2026 conformity law also reaches back to 2025.
Wisconsin	Adds back. Add back on Schedule I, then regular depreciation.
Wyoming	No income tax. No state income tax.

What changed in 2026

State legislatures spent late 2025 and 2026 responding to the federal law. The changes that matter for rental owners:

• Oregon decoupled. Senate Bill 1507, signed April 9, 2026, requires an addback for property placed in service in tax years beginning on or after January 1, 2026. Oregon had followed federal bonus before. Oregon details.
• Delaware cut 2026 property to 20%. House Bill 255, signed November 19, 2025, applies the old 20% rate to 2026 property for individuals and pass-through owners, with no bonus for 2027 through 2030. Delaware details.
• Arizona updated its conformity date and picked up the full bonus for individuals. House Bill 4168, signed in June 2026, moved Arizona to the Internal Revenue Code as of January 1, 2026. Individuals add back federal depreciation and then subtract the same bonus-inclusive amount, so the two cancel. Only C corporations are decoupled. The update reaches back to 2025, so if you placed a rental in service in 2025 and already filed in Arizona, ask your CPA whether an amended return makes sense. Arizona details.
• West Virginia’s 2026 conformity law reaches back to 2025. Senate Bill 400 adopts federal changes made during 2025, including the 100% bonus, retroactively. West Virginia details.
• North Carolina updated its conformity date but kept its 85% addback. Session Law 2026-31, signed July 2, 2026. North Carolina details.
• Colorado considered decoupling and didn’t. A 2026 bill to require an addback starting in 2027 died in a Senate committee. Colorado details.
• Washington passed an income tax that starts in 2028. A 9.9% tax on income over $1 million is scheduled for January 1, 2028, and a repeal initiative is on the November 3, 2026 ballot. It also faces court challenges, so it may never take effect. Either way, it doesn’t affect 2026 or 2027. Washington details.

“No income tax” doesn’t always mean no state adjustment

Nine states don’t tax personal income, so individual owners there have no state return on which bonus depreciation could be added back. A few come with a footnote:

• New Hampshire: a rental business grossing more than $109,000 a year files the Business Profits Tax, which doesn’t allow bonus depreciation.
• Tennessee: individuals pay no tax on rental income, but LLCs, limited partnerships, and corporations generally owe the franchise and excise tax, and the excise part allows only 20% bonus for assets acquired in 2026. Many rental owners hold property in an LLC, so this one catches people.
• Texas: the franchise tax reaches LLCs, but most rental owners owe nothing under it.
• Washington: see above. Nothing for 2026, but a tax on high incomes is scheduled for 2028.

If you own a rental in another state

Rental income is generally taxed by the state where the property sits, and usually by your home state too, with a credit to avoid paying twice. So a California resident with a rental in Arizona has two states’ rules to deal with, plus the federal return: Arizona allows the full bonus and California allows none. A Texas resident with a rental in Oregon has no home-state return but still files in Oregon, which now adds the bonus back. And a Tennessee rental held in an LLC brings in Tennessee’s excise tax. Tell your CPA where every property is located before they build the depreciation schedules.

What this means for your cost segregation study

Decoupling alone rarely makes a study not worth it. The federal deduction is the bulk of the benefit, and the state deduction still arrives, just over several years instead of one. Our guide to when cost segregation isn’t worth it covers the cases where it truly doesn’t pencil, and state decoupling alone usually isn’t one of them.

Expect a separate state schedule. In most decoupled states, your CPA will track federal and state depreciation separately for as long as you own the property. In Connecticut, Minnesota, North Carolina, and Ohio, the addback comes back on a fixed schedule over four to six years instead. That also affects the state side of depreciation recapture when you sell.

Timing still matters on the federal side. If you bought a rental this year, the year your deduction starts, on both returns, depends on when the property is ready and available for rent, not when you closed. See why December 31 matters if you bought a rental this year.

Don’t count on first-year state savings. If you live in California, New York, Pennsylvania, or another state that adds bonus back, run the numbers on the federal benefit and treat the state piece as a slower bonus.

Where we come in

We prepare the engineering-based cost segregation study your CPA uses to claim the deduction, federal and state. The study breaks out every asset by recovery period, which is exactly what your CPA needs to build the separate state schedule in a decoupled state. Start with our cost segregation study overview, or book a free consultation and we’ll estimate what a study would reclassify on your property, so you and your CPA can see what it means for your federal and state returns.

State tax law changes often. This table reflects our review of state statutes and revenue department guidance as of October 6, 2026, for individual and pass-through owners. It is not tax advice. Confirm your state’s current treatment with your CPA before filing.