Connecticut Bonus Depreciation: Full Add-Back, Returned Over Five Years.

Federal vs Connecticut, Side by Side

For an individual investor's cost-segregation-reclassified components, personal income tax only:

Source: Conn. Gen. Stat. chapter 229, §12-701(a)(20)(A)(ix) and (B)(v); IRC §168(k). Federal bonus figures reflect current law; eligibility depends on acquisition and placed-in-service dates and elections.

How the Connecticut add-back actually works

The study itself does not change. The same engineering-based reclassification, using nationally-recognized construction cost data, MACRS classification per Rev. Proc. 87-56, and IRS Pub 5653 ATG-aligned documentation, produces the same component schedule whether the property sits in Connecticut or anywhere else. What changes is what happens on the Connecticut personal income tax return: an individual adds back the FULL federal §168(k) additional allowance, under Conn. Gen. Stat. §12-701(a)(20)(A)(ix) — but only for property placed in service after September 27, 2017. That date is not a footnote; it is the test that determines whether the mechanic applies to your property at all.

That is not the end of the story, and this is the reassuring part. Conn. Gen. Stat. §12-701(a)(20)(B)(v) brings the delayed amount back as a 25% subtraction in each of the four succeeding taxable years. So a property owner who adds back the full federal allowance in the year it is claimed recovers that same amount in four equal 25% installments across the following four years — five tax years altogether, the addition year plus four subtraction years — not a same-year return and not a permanent loss.

Say this precisely, because it is easy to blur: the deduction is NOT "returned over four years" starting in the addition year. It is added back in full in year one, and the four 25% subtractions begin in the years that follow. By the end of the fourth succeeding taxable year, the full amount has come back.

Your CPA receives the same Cost Seg Smart engineered report, the same Form 4562-ready federal schedule, and the same Form 3115 §481(a) section if this is a lookback study. The Connecticut addition and its four years of 25% subtractions are then computed from that same schedule, for the personal income tax return.

What this page does NOT tell you: Corporation Business Tax

Everything above describes the Connecticut personal income tax. That is what has been verified against the statute — Conn. Gen. Stat. §12-701(a)(20)(A)(ix) and (B)(v), both provisions of the personal income tax chapter.

The Connecticut Corporation Business Tax (CBT) is a different tax with its own rules, and its treatment of federal §168(k) bonus depreciation has NOT been confirmed here. It would be a guess to say the same full-add-back, four-year-25%-subtraction mechanic applies to a C corporation, and this page does not guess. If a property is held by a corporation, or the CBT otherwise applies to your entity, establish the CBT-specific answer directly with the Connecticut Department of Revenue Services before relying on any bonus depreciation treatment for that return.

This distinction matters because most Connecticut real estate is held by individuals, partnerships, and pass-through entities whose owners report on the personal income tax — the personal income tax mechanic above will cover most readers of this page. It will not cover a C corporation, and it should not be assumed to.

Illustrative numbers: a Connecticut single-family rental

Using the single-family residential (SFR) band we publish — 9–32% of depreciable basis reclassified into 5/7/15-year property, 16% representative — on a property priced between $250,000 and $650,000, with a 20% residential land allocation, and 100% federal bonus depreciation for eligible components under current law, placed in service after September 27, 2017. The Connecticut column is described qualitatively because Connecticut adds back the full allowance and recovers it through four annual 25% subtractions rather than a Year-1 deduction, for the personal income tax:

Figures are illustrative and use the site's published SFR reclassification band; your result depends on your basis, land allocation, bracket, component mix, and eligibility. Whether the full federal deduction is usable in the current year still depends on your passive-loss, at-risk, basis, and business-interest situation. This table describes the Connecticut personal income tax only — if the property is held by an entity subject to the Corporation Business Tax, confirm treatment with DRS before assuming this schedule applies.

Forms your CPA files for a Connecticut property

For an individual Connecticut investor, the workflow runs on both the federal return and the Connecticut personal income tax return, because the addition and its four years of 25% subtractions have to be tracked over multiple years:

1. Federal Form 4562: depreciation and amortization, including the §168(k) bonus deduction on eligible reclassified components. Flows to Schedule E (rental) or Schedule C (active business).
2. Schedule E (or Schedule C): the accelerated federal deduction reduces federal taxable income in Year 1, subject to the federal passive-loss, at-risk, basis, and business-interest limits.
3. Connecticut personal income tax return: the full federal §168(k) additional allowance is added back, per Conn. Gen. Stat. §12-701(a)(20)(A)(ix), for property placed in service after September 27, 2017.
4. 25% subtractions in each of the four succeeding taxable years: Connecticut recovers the added-back amount over four years, per §12-701(a)(20)(B)(v) — this has to be tracked on the Connecticut return until fully recovered.
5. Form 3115 §481(a) section: included only if this is a federal lookback method change on a property placed in service in a prior year (see below).

The reclassified schedule is the same engineered output for both books; the difference is that federal claims the Year-1 bonus while Connecticut adds back the full allowance in the year claimed and recovers it through four annual 25% subtractions afterward, for the personal income tax. A property held by a corporation subject to the Corporation Business Tax should confirm its own treatment with DRS rather than assume this schedule.

Form 3115 lookback on a Connecticut property

If the property was placed in service in a prior tax year and depreciation was reported using a non-segregated method, a federal Form 3115 (Application for Change in Accounting Method) may allow a current-year §481(a) catch-up adjustment for the accelerated depreciation you missed, generally without amending prior returns. This is often the single biggest acceleration mechanism in cost segregation. Any catch-up dollars are illustrative and depend on placed-in-service date, prior depreciation claimed, bonus eligibility, land allocation, and component mix.

The federal §481(a) catch-up is the primary lever, and it remains subject to the federal passive-loss, at-risk, and basis limits. For Connecticut personal income tax, the catch-up year's bonus-eligible amount is added back in full the same way an ordinary Year-1 allowance would be — provided the property was placed in service after September 27, 2017 — and recovered through 25% subtractions in each of the four following years, per §12-701(a)(20)(B)(v).

See our full Form 3115 cost segregation guide for federal mechanics, partnership and LLC pass-through treatment, and timing rules.

Should you skip cost segregation in Connecticut? No.

Connecticut's add-back changes the timing of the state-side benefit for the personal income tax, not the fundamental economics. The math still favors doing the study, for three reasons:

1. The full federal Year-1 bonus is intact. Connecticut does not reduce the federal deduction; the full §168(k) bonus is claimed on the federal return. How much you use in the current year still depends on your passive-loss, at-risk, basis, and business-interest situation.
2. Connecticut defers the benefit, it does not eliminate it. The full add-back for property placed in service after September 27, 2017 is followed by a 25% subtraction in each of the four succeeding taxable years (§12-701(a)(20)(B)(v)), so the full reclassified deduction is recovered on the Connecticut personal income tax return over five years.
3. The Form 3115 lookback still captures missed federal years. If the property was placed in service in a prior year and depreciated without cost segregation, the federal §481(a) catch-up may be available, generally without amending prior returns.

The nuance to flag with your CPA is that Connecticut's personal income tax mechanism runs over five years — the addition year and the four years of 25% subtractions that follow both need to be tracked on the Connecticut return — and that this is verified for the personal income tax only. If the property is held by an entity subject to the Corporation Business Tax, establish that answer with DRS separately; do not assume it mirrors the personal income tax mechanic.

Frequently asked

Related guides

• Bonus depreciation by state: overview
• All 50 states: conformity reference table
• Minnesota bonus depreciation (decoupled, 80% add-back)
• Maryland bonus depreciation (decoupled, manufacturing carve-out)
• Indiana bonus depreciation (decoupled, first-year add-back)
• Form 3115 cost segregation lookback: §481(a) mechanics
• What is cost segregation: the full primer
• Sample cost segregation reports