The state tax treatment of bonus depreciation provisions depends on the state’s conformity to the Internal Revenue Code (IRC) and each state’s decoupling provisions.
States follow different approaches in adopting conformity to the IRC, resulting in inconsistent state tax treatment of federal expensing and bonus depreciation rules. Some states conform to the current IRC, for example, Colorado, Kansas, and Louisiana; other states have decoupled from the IRC provisions, for example, Illinois, New Jersey, New York, and Pennsylvania; and others have enacted legislation that allows partial conformity or conformity in some but not all tax years covered by the federal rule, for example, Arkansas, Connecticut, and Kentucky.
See Also
What can I expense or depreciate with the business safe harbor election?Depreciation Expense vs. Accumulated Depreciation: What's the Difference?Does Accumulated Depreciation Affect Net Income?What Is Depreciation in Accounting | How to CalculateBelow is a 50-state chart that details each state’s conformity to the TCJA provisions that provide bonus depreciation.
State Follows Bonus Depreciation - TCJA Updates
This chart shows whether the state conforms to the provision of the Tax Cuts and Jobs Act (TCJA) that provides a 100% first-year deduction — bonus depreciation — for the adjusted basis of qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Or after September 27, 2017, and before January 1, 2024, for certain properties with longer production periods.
Alaska’s oil and gas producers must compute depreciation based on IRC § 167, as that section read on 6-30-1981.
Alabama conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Arkansas does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Arizona does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. When computing Arizona taxable income, an add-back of any such depreciation a taxpayer claimed on its federal return is required. A subtraction is then allowed for depreciation permitted under the IRC computed as if the taxpayer had not elected bonus depreciation.
California does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Colorado conforms to the IRC as currently amended and has not decoupled from the changes made by the Tax Cuts and Jobs Act (TCJA) IRC § 168(k)that allows a 100% first-year deduction for the adjusted basis for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Connecticut does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. IRC §168(k) does not apply for Connecticut purposes.
The District of Columbia does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
The District does not allow a deduction for bonus depreciation.
Delaware conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Federal deduction is reflected in federal taxable income, Delaware's starting point for computing income, and Delaware requires depletion adjustment but not deprecation adjustment.
Florida does not conform to the bonus depreciation changes made by the Tax Cuts and Jobs Act. Taxpayers must add back to taxable income an amount equal to 100% of any amount deducted for federal income tax purposes as bonus depreciation for the taxable year. A taxpayer may deduct one-seventh of the amount added back in each tax year, beginning with the year bonus depreciation is added back.
Georgia does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Georgia's IRC conformity specifically excludes IRC § 168(k).
Hawaii does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Hawaii does not conform to IRC § 168(k).
Iowa does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1,2023. Iowa only conformed to the additional first-year depreciation under IRC §168(k) — bonus depreciation — for property placed in service during tax years beginning on or after January 1, 2021. Prior to January 1, 2021, Iowa did not allow bonus depreciation for state tax purposes.
Idaho does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Effective for tax years ending on or after December 31, 2021, Illinois decouples from the 100% depreciation deduction. For tax years beginning before December 31, 2021, the state conformed to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis of qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Indiana does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023..
Kansas conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
However, Kansas has not explicitly conformed to or decoupled from the Tax Cuts and Jobs Act, but it does adopt the current IRC. The starting point for determining a corporation's Kansas taxable income is federal taxable income. A corporation's Kansas taxable income is its federal taxable income after net operating-loss deduction and special deductions for the tax year with the modifications.
Kentucky does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. For property placed in service after September 10, 2001, only the depreciation deduction allowed under IRC §168 in effect on December 31, 2001 — exclusive of any amendments made subsequent to that date — is allowed.
Louisiana conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Massachusetts does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Massachusetts decoupled from the federal bonus depreciation provisions underIRC § 168(k).
Maryland does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Maine does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. For property placed in service in 2015, an additional modification applies to all property placed in service in Maine.
Michigan does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Since taxpayers must calculate their federal taxable income as if IRC Section 168(k) — relating to bonus depreciation — were not in effect, Michigan does not adopt Sec. 168(k)(2). This applies to both the corporate income tax and taxpayers who elect to file and pay the Michigan Business Tax.
Minnesota does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Taxpayers must add back 80% of the federal depreciation bonus to their Minnesota return in the first year and then 20% of the add-back amount can be subtracted in each of the next five years.
Missouri conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Missouri conforms to current federal depreciation rules except for the 30% bonus depreciation under the 2002 federal act.
Mississippi partially conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Effective July 1, 2021, Mississippi expressly provides that, for new or used aircraft, equipment, engines, or other parts and tools used for aviation, the allowance for bonus depreciation conforms to federal bonus depreciation rates, and the “reasonable allowance” for depreciation is 100%. For computing income tax for tax years beginning after December 31, 2022, expenditures for business assets that are qualified property or qualified improvement property are eligible for 100% bonus depreciation. They may be deducted as an expense incurred by the taxpayer during the tax year during which the property is placed in service, notwithstanding any changes to federal law related to cost recovery beginning on January 1, 2023, or on any other date.
Montana follows federal law and conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Or after September 27, 2017, and before January 1, 2024, for certain properties with longer production periods.
North Carolina does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Taxpayers must add back 85% of the amount allowed as a special accelerated depreciation deduction under IRC §168(k) or IRC §168(n) for property placed in service during the taxable year but can later deduct 20% of the amount added back over a five-year period.
North Dakota follows federal law and conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Or after September 27, 2017, and before January 1, 2024, for certain properties with longer production periods.
North Dakota follows federal law and conforms to the technical corrections made in the CARES Act.
Nebraska conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
New Hampshire does not conform to the Tax Cuts and Jobs Act provision that allows a 100% first-year deduction for the adjusted basis for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
NJ decoupled from federal depreciation as of July 2002, so the state does not conform to the Tax Cuts and Jobs Act provision that extends bonus depreciation for qualified property acquired and placed in service from 2015 through 2019. Or through 2020 for certain longer-lived and transportation properties.
New Mexico conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
No corporate income tax.
New York does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and beforeJanuary 1, 2023.
No corporate income tax.
Oklahoma conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. For taxable years beginning after December 31, 2021, Oklahoma permanently provides taxpayers the option to immediately and fully expense certain business assets eligible for 100% bonus depreciation, deductible as an incurred expense during the taxable year in which the property is placed in service.
Oregon conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Pennsylvania does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Rhode Island does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. Any bonus depreciation taken for federal purposes must be added back to income for Rhode Island purposes.
South Carolina does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
South Carolina does not allow bonus depreciation. Addition or subtraction is required for the difference in depreciation expense claimed for federal purposes and the amount allowed for state purposes.
No corporate income tax.
Except for assets placed into service after December 31, 2022, Tennessee does not conform to the Tax Cuts and Jobs Act of 2017. Tennessee has decoupled from federal changes to depreciation, explicitly tying depreciation toIRC § 168as it existed and applied immediately before the passage of the Job Creation and Worker Assistance Act of 2002.
Texas does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Utah conforms to the Tax Cuts and Jobs Act of 2017 provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Virginia does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Virginia disallows any bonus depreciation for certain assets under IRC § 168(k).
Vermont does not conform to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Vermont has decoupled from the federal bonus depreciation provision.
No corporate income tax.
Wisconsin does not conform to the Tax Cuts and Jobs Act of 2017 provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
West Virginia conforms to the Tax Cuts and Jobs Act provision that provides a 100% first-year deduction for the adjusted basis allowed for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. The state conforms to all amendments made to the IRC as of a specific date.
No corporate income tax.
