Does Georgia allow bonus depreciation? No. Georgia writes Section 168(k) out of its tax code every year, so the 100% first-year deduction you can now claim on a federal return gets added back on your Georgia return, and the state lets you recover that cost over the asset’s regular recovery period instead.
As co-founder of Seneca Cost Segregation and a real estate investor myself, I’ve worked through this federal and state gap with owners and CPAs in states that decouple from bonus, Georgia among them. What we see consistently is an owner who expects the federal bonus figure to flow straight onto the Georgia return, then finds a large addback at filing time.
Below, I cover why Georgia decouples, what it lets you claim instead, what the gap looks like on an $800,000 rental, how the adjustment is reported, and why a study still earns its fee on a Georgia property.
TL;DR — Georgia Bonus Depreciation at a Glance
- ●Your federal return keeps the full benefit: 100% bonus depreciation still applies federally to eligible components acquired and placed in service after January 19, 2025, whatever Georgia does.
- ●Georgia adds the bonus back: the state treats Section 168(k) as if it did not exist, so you file Georgia Form 4562 and deduct the reclassified assets on their normal MACRS schedules.
- ●A study still roughly doubles the Georgia year-one deduction: in our illustrative $800,000 rental, Georgia depreciation moves from $23,032 to $49,044 in year one, with no bonus at all.
- ●The Georgia deduction catches up: in year two of the same example, Georgia deducts $73,685 against $21,525 federally, and the gap keeps closing as components finish recovering.
- ●Section 179 is a partial workaround at most: Georgia matches the federal dollar limits but excludes the qualified real property that commercial owners usually want to expense.
- ●Your exit numbers differ by state: Georgia basis stays higher than federal basis, so the gain you report to Georgia at sale will not match your federal gain.
Why Georgia Does Not Allow Bonus Depreciation
The answer sits in how Georgia defines the Internal Revenue Code for its own income tax.
How Georgia’s Static IRC Conformity Works
Georgia adopts the federal code as of a fixed date, and the General Assembly passes a bill each year to move that date forward. Each bill also lists federal sections Georgia refuses to follow, and Section 168(k) has been on that list through every version of bonus depreciation.
Rolling-conformity states pick up federal changes automatically. Georgia’s static approach means a federal expansion like the One Big Beautiful Bill reaches the state return only if lawmakers choose to adopt it.
What HB 1199 Changed for 2025 and 2026 Returns
Governor Kemp signed HB 1199 on March 20, 2026, moving Georgia’s conformity date to January 1, 2026 for tax years beginning on or after January 1, 2025. The bill adopts much of the new federal law, yet it lists Sections 168(k) and 168(n) among the provisions “treated as if they were not in effect.”
So the restored 100% federal rate, covered in our breakdown of bonus depreciation under the Big Beautiful Bill, stops at the state line. The same list also removes the federal rules for expensing qualified real property under Section 179 and the new 100% deduction for qualified production property.
What Georgia Allows Instead of Bonus Depreciation
Georgia still rewards a faster schedule, just at a slower pace than the federal return.
Regular MACRS on Reclassified Components
Components a study separates from the building keep their shorter federal recovery periods on the Georgia return. Under IRS Publication 946, 5- and 7-year personal property uses the 200% declining balance method, and 15-year land improvements use 150% declining balance, each with the half-year convention in most cases.
What changes is the first-year spike. The asset is spread across five, seven, or 15 years instead of landing in one, and our guide to accelerated depreciation schedules for building components shows which items fall into each class.
Section 179 Expensing With Georgia Limits
Georgia follows the federal Section 179 dollar limits, which were $2,500,000 with a $4,000,000 phase-out threshold for 2025 according to the Georgia Form 4562 instructions. The same instructions say Georgia has not adopted the Section 179 deduction for certain real property, which covers qualified improvement property and nonresidential roofs, HVAC, fire protection, and security systems.
Section 179 also carries a business income limit, recomputed on Georgia numbers, and many rental activities face extra hurdles before they can use it. Treat it as a narrow tool for equipment and furnishings, and confirm eligibility with your CPA.
Qualified Improvement Property on a 15-Year Life
Interior improvements to a nonresidential building keep their 15-year straight-line life in Georgia. The Georgia Department of Revenue adopted that federal correction for tax years beginning on or after January 1, 2019, while still disallowing bonus on the same property.
For a tenant build-out, the federal return can expense the work while Georgia spreads it over 15 years. Our page on leasehold improvements and bonus depreciation covers what qualifies.
Compare Federal and Georgia Deductions on an $800,000 Rental
Assume a residential rental with $800,000 of depreciable basis (land excluded) placed in service in March 2026, and a hypothetical study that moves 18% to 5-year property and 8% to 15-year land improvements, leaving 74% in the building.
In year one, the Georgia return adds back $176,000 more depreciation than it subtracts, which works out to about $8,782 of extra Georgia tax at the 4.99% rate that applies for 2026. By year two the Georgia deduction is more than three times the federal one, so the difference reverses over the recovery periods rather than disappearing.
How to Report the Georgia Bonus Depreciation Addback
The Georgia Department of Revenue lays out a two-sided adjustment, and the basis record carries it through to the sale.
Add Back the Federal Depreciation
Your CPA attaches the federal Form 4562 to the Georgia return and enters the federal depreciation, bonus included, on the “other addition” line. Individuals report it on the Form 500 adjustments, and corporations and pass-through entities use the matching lines on their own returns.
Subtract Depreciation From Georgia Form 4562
Depreciation is then recomputed on Georgia Form 4562 without the special allowance, and that Georgia figure goes on the “other subtraction” line. The Georgia Department of Revenue’s federal tax changes guidance explains that one combined adjustment can cover differences from several federal acts.
Track the Georgia Basis Until You Sell
Every year of the gap leaves your Georgia adjusted basis higher than your federal basis. Keep a separate Georgia depreciation schedule for each reclassified asset, because the state expects a different gain or loss on any property where federal bonus was claimed.
Other Georgia Depreciation Differences to Plan Around
Bonus is the largest gap, and a few smaller ones travel with it.
- ●Electing real property trades or businesses: Georgia applies Section 163(j) as it stood before 2017, so it does not recognize the election, and an owner on federal ADS lives can use regular GDS lives for Georgia.
- ●Suspended passive losses: if federal passive loss rules hold back part of the bonus deduction, the Georgia adjustment changes too. Our page on whether cost segregation can offset W-2 income explains when those losses become usable.
- ●Qualified production property: the new federal 100% deduction for certain production buildings is also excluded, so manufacturers model those buildings on regular lives for Georgia.
- ●Pass-through owners: partnerships and S corporations report Georgia adjustments to their owners, including the separate reporting of gain on assets where Section 179 was claimed.
- ●Look-back studies: a federal Form 3115 is attached to the Georgia return, and any bonus portion of the catch-up is backed out for Georgia.
A common read we hear from Georgia clients and their CPAs is that a study only pays federally once bonus is off the table. The reality is that the reclassification itself carries over in full, and only the speed of the state deduction changes.
How Cost Segregation Still Lowers Georgia Taxes
A study does two jobs on a Georgia property, and decoupling affects only one of them.
The federal return keeps the full first-year deduction, which is usually where most of the dollars sit given the gap between federal rates and Georgia’s 4.99%. On the state side, the same study moves basis out of 27.5 or 39 years into 5-, 7-, and 15-year classes, and our overview of cost segregation and bonus depreciation explains how those classes are identified.
What we find on Georgia acquisitions is that the state deduction from reclassified components is front-loaded enough to matter even at Georgia’s rate. The trade-off shows up at exit, where component depreciation can be recaptured, and our explainer on the depreciation recapture tax rate walks through that math.
Mistakes to Avoid With Georgia Depreciation
Each of these turns up on Georgia returns and each has a simple fix.
- ●Carrying the federal deduction onto the Georgia return: the full bonus amount overstates Georgia depreciation and can trigger a Georgia assessment. Add back the federal figure and subtract the Georgia figure every year.
- ●Assuming Section 179 replaces bonus for building improvements: Georgia excludes qualified real property from its Section 179 rules, so roofs, HVAC, and interior improvements on commercial buildings will not qualify. Plan those assets on their regular lives.
- ●Skipping Georgia Form 4562: without the state form, the subtraction has no support. Prepare it alongside the federal form each year.
- ●Losing the Georgia basis schedule: a single depreciation record leaves the state gain wrong at sale. Keep federal and Georgia schedules side by side for every component.
- ●Using federal ADS lives on the Georgia return: an electing real property trade or business may be giving up Georgia depreciation it is entitled to. Recompute on GDS lives for Georgia.
- ●Amending prior returns to fix a missed study: the catch-up for a study done years after purchase runs through a current-year Form 3115 and its 481(a) adjustment. Have your CPA carry that adjustment onto the Georgia return as well.
Frequently Asked Questions
Below are the questions Georgia owners and their CPAs ask us most often about bonus depreciation.
How Seneca Builds Schedules for Georgia Returns
A Georgia owner needs one engineered asset list that supports two depreciation schedules. Our in-house engineering team classifies each component, our Head of Engineering signs off on every report, and audit defense is included, backed by 10,200+ properties assessed with no IRS audits lost. To size the opportunity before a call, try our cost segregation calculator.
Conclusion
Georgia’s answer on bonus depreciation is a firm no, and HB 1199 kept it that way for the new federal rules. A Georgia owner still gets the full federal deduction, plus a faster state schedule from the same reclassification.
The work is in the reporting: an addback, a Georgia Form 4562, and a basis record that holds up at sale. When you want to see what both returns would look like for your property, a free estimate from our team is a simple place to start.
