State Tax Guides for Real Estate Investors
Cost segregation is a federal strategy, but what you actually keep depends on the state. Some states allow the full 100% bonus depreciation deduction. Some disallow all of it. Some allow a fraction now and return the rest over five or seven years. Some have no income tax but tax the entity instead.
These guides cover the details that change the answer: the state income tax rate, whether a pass-through entity tax election is available and on what terms, how the state conforms to federal bonus depreciation and Section 179, and the cost segregation issues specific to that state's property mix and rules.
Cost Segregation in California
California tax rate 13.3%. PTET 9.3%. State bonus depreciation: None.
Read the California guide →Cost Segregation in Texas
Texas tax rate 0%. No PTET. State bonus depreciation: $2.65M.
Read the Texas guide →Cost Segregation in Florida
Florida tax rate 0%. No PTET. State bonus depreciation: 1/7.
Read the Florida guide →Cost Segregation in New York
New York tax rate 10.9%. PTET 6.85-10.9%. State bonus depreciation: None.
Read the New York guide →Cost Segregation in New Jersey
New Jersey tax rate 10.75%. PTET BAIT. State bonus depreciation: ADS.
Read the New Jersey guide →Cost Segregation in Illinois
Illinois tax rate 4.95%. PTET 4.95%. State bonus depreciation: None.
Read the Illinois guide →Cost Segregation in Pennsylvania
Pennsylvania tax rate 3.07%. No PTET. State bonus depreciation: None.
Read the Pennsylvania guide →Cost Segregation in Ohio
Ohio tax rate 2.75%. PTET 3%. State bonus depreciation: 5/6.
Read the Ohio guide →Cost Segregation in Georgia
Georgia tax rate 4.99%. PTET Yes. State bonus depreciation: 179 only.
Read the Georgia guide →Cost Segregation in North Carolina
North Carolina tax rate 3.99%. PTET 3.99%. State bonus depreciation: 15%.
Read the North Carolina guide →Cost Segregation in Arizona
Arizona tax rate 2.50%. PTET 2.50%. State bonus depreciation: None.
Read the Arizona guide →Cost Segregation in Colorado
Colorado tax rate 4.40%. PTET 4.40%. State bonus depreciation: 100%.
Read the Colorado guide →Cost Segregation in Tennessee
Tennessee tax rate 0%. No PTET. State bonus depreciation: 20%.
Read the Tennessee guide →Cost Segregation in Virginia
Virginia tax rate 5.75%. PTET 5.75%. State bonus depreciation: None.
Read the Virginia guide →Cost Segregation in Washington
Washington tax rate 0%. No PTET. State bonus depreciation: Exempt.
Read the Washington guide →Not Seeing Your State?
We work with clients in all fifty states. Book a call and we will walk through your state's rules and your specific situation together.
Frequently Asked Questions
What is a cost segregation study?
A cost segregation study is an engineering-based analysis that separates a building's purchase or construction cost into its components and reassigns them from the default 27.5-year or 39-year recovery period to their correct 5-year, 7-year, and 15-year MACRS classifications. Because those shorter-life categories qualify for bonus depreciation, the reclassified amount is generally deductible in the first year.
Is a cost segregation study worth the cost?
Generally yes once depreciable basis exceeds roughly $500,000, assuming you can actually use the deduction in the current year. The analysis that matters is not the size of the deduction but whether the passive activity loss rules, basis limits, and excess business loss limitation allow you to deduct it now.
How much of a property typically gets reclassified?
It depends on the asset class. Office and warehouse properties commonly reclassify 15% to 25% of depreciable basis, multifamily 20% to 35%, restaurants and self-storage 30% to 40%, and hotels 30% to 45%. Furnished short-term rentals usually land between 25% and 35%.
Can I do a study on a property I bought years ago?
Yes. A Form 3115 change in accounting method captures every missed deduction from the placed-in-service year in a single Section 481(a) adjustment claimed in the current year. No amended returns are needed and there is no three-year limitation.