California depreciation
California still does not allow federal bonus depreciation
Federal law may permit a large first-year deduction, but California generally requires a different depreciation calculation because it does not conform to federal bonus depreciation.
The difference is not limited to the year an asset is purchased. It changes California adjusted basis and can create state deductions in later years when federal depreciation is smaller or already exhausted.
Maintain two fixed-asset schedules
Each asset should have federal and California cost, method, recovery period, accumulated depreciation, and adjusted basis. A single federal tax report is not enough when bonus depreciation is claimed.
The first-year addback is only the beginning
The federal bonus amount generally increases the California modification in the first year. Later California depreciation can produce subtraction adjustments, so the original difference must remain on the schedule until disposition.
Disposals expose missing history
Gain, loss, and recapture depend on adjusted basis. If the California basis was not tracked from acquisition, a later sale or trade can require years of reconstruction.
Model cash flow at both levels
A purchase may reduce federal estimated tax substantially while providing a much smaller current California benefit. Financing and quarterly payment decisions should reflect both outcomes.
Record the federal and California treatment when the asset is placed in service. Do not wait until the return or eventual sale to reconstruct the state basis.
Apply the guidance to your facts
Discuss the accounting and tax decisions behind the form.
We begin with the records, entity structure, timing, and decisions that apply to your situation.
Schedule a complimentary callThis article provides general educational information and is not individualized accounting, legal, investment, or tax advice. Tax rules and forms change; confirm the current requirements for your facts before acting.