Montana Bonus Depreciation: Full Conformity, Corporate Elections Must Match Federal.
Montana taxable income starts from federal taxable income, which already reflects bonus depreciation — no add-back for an individual. For a corporation, Montana law goes further: depreciation elections must match the elections made on the federal return, including the §168(k) election itself.
Reviewed by Cost Seg Smart Editorial Team · Last verified against Mont. Code Ann. §15-30-2120 — adjustments to federal taxable income
The 30-second answer: Montana conforms to federal §168(k) bonus depreciation. For an individual, Montana taxable income starts from federal taxable income — a figure that already reflects any bonus claimed — and the adjustments list has no bonus add-back entry at all.
For a corporation, conformity is explicit and procedural: Mont. Code Ann. §15-31-114(1)(b)(i) requires all depreciation elections to be the same as the elections made for federal purposes, including the §168(k) election. A corporation cannot elect bonus depreciation federally and decline it for Montana (or the reverse).
On a representative Montana single-family rental (the single-family rental band we publish, 9–32% of depreciable basis reclassified, 16% representative), the reclassified components alone generate an estimated $18K–$165K of federal Year-1 depreciation — roughly $6,660–$61,570 of federal Year-1 tax savings at the 37% top bracket, flowing through to Montana with no add-back.
The corporate nuance: elections must match, not just outcomes
For an individual, Montana's conformity is close to invisible: taxable income simply starts from the federal figure, which already has bonus depreciation baked in, and the §15-30-2120 adjustments list has nothing that adds it back. There is no separate Montana decision to make.
Corporate conformity works differently — not just as a matter of what the tax base includes, but as an explicit procedural rule. Mont. Code Ann. §15-31-114(1)(b)(i) states that all elections made for depreciation must be the same as the elections made for federal income tax purposes. Bonus depreciation under §168(k) is itself an election a taxpayer can choose to take or decline (electing out is a standard §168(k) mechanic). Montana's rule means that election, whichever way it goes, carries through identically to the Montana return.
The practical consequence: a Montana corporation cannot claim bonus depreciation on its federal return while declining it on its Montana return, or the other way around. This is a compliance detail worth flagging specifically whenever a corporate election-out decision is on the table — the Montana filing needs to track whatever was decided federally, not make an independent choice.
One correction worth stating plainly: an earlier citation to §15-30-2110 is dead law. It was repealed by 2021 Montana Laws Chapter 503 as part of a broader individual income tax overhaul effective for tax year 2024, and should not appear in any current reference. The live sections governing this answer are §15-30-2101 and §15-30-2120.
Federal vs Montana, Side by Side
For an individual or corporate taxpayer's cost-segregation-reclassified components:
| Tax provision | Federal (IRC) | Montana |
|---|---|---|
| Bonus depreciation under §168(k) — individual | 100% may apply to qualified property acquired and placed in service after January 19, 2025, subject to §168(k) eligibility, related-party/prior-use, binding-contract, and election rules | Flows through automatically. Montana taxable income starts from federal taxable income (§15-30-2101); no add-back in the §15-30-2120 adjustments list |
| Bonus depreciation under §168(k) — corporate | Same federal §168(k) rules as above, including the election-out mechanic | Must match the federal election. All depreciation elections must be the same as those made federally (§15-31-114(1)(b)(i)) |
| Federal usability of the deduction | Subject to passive activity, at-risk, basis, and business-interest limits | Same federal limits govern the federal deduction; Montana's conformity applies on top |
| MACRS asset class lives | 5 / 7 / 15 / 27.5 / 39 yr per Rev. Proc. 87-56 | Same class lives; Montana uses the federal schedule directly |
Source: Mont. Code Ann. §15-30-2120; IRC §168(k). Federal bonus figures reflect current law; eligibility depends on acquisition and placed-in-service dates and elections. §15-30-2110 was repealed by 2021 Mont. Laws Ch. 503, effective tax year 2024, and is not current law.
Illustrative numbers: a Montana 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:
| Line item | Federal | Montana |
|---|---|---|
| Purchase price band | $250,000–$650,000 | Same property |
| Depreciable basis (20% land allocation) | $200,000–$520,000 | Same basis, carried through from federal taxable income |
| Reclassified to 5/7/15-yr (9–32% of basis) | $18K–$165K | Same amount, no Montana adjustment |
| Year-1 treatment | $18K–$165K deducted (100% bonus, if eligible) | Same $18K–$165K deducted; flows through unchanged |
| Marginal tax rate | Up to 37% | Montana individual or corporate income tax rate (verify current year with the Montana Department of Revenue) |
| Illustrative Year-1 federal tax savings on reclassified components | ~$6,660–$61,570 (37% × $18K–$165K) | Full conformity; no Montana-level reduction |
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. A corporate taxpayer should confirm its Montana depreciation election matches its federal election.
See a sample cost segregation report
Look at exactly what your Montana study delivers: the component-by-component 5/7/15-year schedule, the Form 4562-ready numbers, and the documentation your CPA files. Real reports are our best answer to "is this legit?"
Forms your CPA files for a Montana property
For a Montana property owner, the workflow is a straightforward pass-through, with one extra check for a corporation:
- Federal Form 4562: depreciation and amortization, including the §168(k) bonus deduction on eligible reclassified components. Flows to Schedule E (rental), Schedule C (active business), or the corporate return.
- 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.
- Montana individual return: no separate depreciation adjustment; the federal taxable income figure carries through.
- Montana corporate return: confirm the depreciation elections, including any §168(k) election or election-out, match what was elected federally (§15-31-114(1)(b)(i)).
- 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; Montana simply requires that the federal and Montana elections be identical for a corporation.
Form 3115 lookback on a Montana 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 Montana, an individual's catch-up flows through unchanged, and a corporation should confirm its Montana depreciation election for the catch-up year matches whatever was elected on the federal Form 3115.
See our full Form 3115 cost segregation guide for federal mechanics, partnership and LLC pass-through treatment, and timing rules.
Should you do cost segregation in Montana?
Yes — Montana's conformity is among the cleanest in this series for an individual, and reliable for a corporation once the election-matching rule is followed:
- The full federal Year-1 bonus is intact, and for an individual, it flows through Montana's own tax base automatically, with no add-back to track.
- A corporation should confirm its Montana election matches its federal election, particularly whenever an election-out decision is on the table for a given asset class.
- 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 procedural rather than substantive: for a corporation, make sure the depreciation elections on both returns are identical. There is no separate Montana planning opportunity here — just a compliance step that is easy to overlook.
Frequently asked
Does Montana allow bonus depreciation?
Yes, in full. Montana conforms to federal §168(k) bonus depreciation — an individual or corporate taxpayer claims the full federal Year-1 bonus on the federal return (100% may apply to qualified property acquired and placed in service after January 19, 2025, subject to eligibility and election rules), and Montana starts its own tax calculation from a base that already reflects it, with no add-back.
How does Montana's conformity actually work for individuals?
Montana taxable income for an individual starts from federal taxable income itself — a figure that already reflects whatever bonus depreciation was claimed on the federal return. The Montana adjustments list at Mont. Code Ann. §15-30-2120 has no entry that adds bonus depreciation back. So the mechanism is not an explicit "Montana allows it" statement so much as the absence of any adjustment that would take it away.
Is Montana's corporate conformity different from the individual side?
It is more explicit, and it comes with a procedural requirement worth knowing. Mont. Code Ann. §15-31-114(1)(b)(i) states directly that all elections made for depreciation must be the same as the elections made for federal income tax purposes — which includes the §168(k) bonus depreciation election itself. A Montana corporation cannot elect bonus depreciation for federal purposes and decline it (or vice versa) for Montana purposes; the two elections have to match.
What does the election-matching rule practically mean for a corporate taxpayer?
It means the depreciation election is a single decision, not two separate ones. If a corporation elects out of federal bonus depreciation for a given asset class (as §168(k) permits), that same election-out applies for Montana purposes — there is no way to take the bonus federally while declining it at the Montana level, or the reverse. This is worth flagging specifically when a corporate return involves an election-out decision, since getting the Montana side wrong is a compliance issue, not just a planning one.
Is there an older Montana citation I should avoid using?
Yes — §15-30-2110 is dead law and should not appear in any current summary or reference. It was repealed by 2021 Montana Laws Chapter 503, part of a broader individual income tax overhaul effective for tax year 2024. The live, current sections are §15-30-2101 (which defines the federal-taxable-income starting point) and §15-30-2120 (the adjustments list, which carries no bonus add-back).
Is cost segregation still worth it in Montana?
Yes, and the Montana-level mechanics are close to the simplest version of conformity: the federal Year-1 bonus flows through because Montana's own tax base already incorporates it. Whether the full federal deduction is usable in the current year still depends on federal passive-activity, at-risk, basis, and business-interest limits, and — for a corporation — on making sure the Montana depreciation election matches whatever election was made federally.
Can I use Form 3115 on a Montana property I bought years ago?
Often, yes, at the federal level. 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 for the accelerated depreciation you missed, generally without amending prior returns. Any catch-up dollars are illustrative and depend on placed-in-service date, prior depreciation, bonus eligibility, land allocation, and component mix. For Montana, the catch-up flows through the same way an ordinary Year-1 bonus would — no separate add-back for an individual, and for a corporation, the same election-matching rule applies to whatever bonus treatment the catch-up uses federally.
What does a Montana cost segregation study rely on for its numbers?
The study reclassifies building components into IRS-recognized MACRS class lives (5, 7, and 15-year) per Rev. Proc. 87-56, using an engineering-based methodology that follows the IRS Cost Segregation Audit Techniques Guide (Publication 5653). The reclassified components may then qualify for federal §168(k) bonus depreciation on the federal return (100% for qualified property acquired and placed in service after January 19, 2025, subject to eligibility and election rules), and Montana conforms with no add-back for individuals and an explicit election-matching requirement for corporations. The engine ships our own calibrated, nationally-recognized construction cost data.
Related guides
- Bonus depreciation by state: overview
- All 50 states: conformity reference table
- Wyoming bonus depreciation (no income tax)
- Washington bonus depreciation (no income tax, B&O caveats)
- Form 3115 cost segregation lookback: §481(a) mechanics
- What is cost segregation: the full primer
- Sample cost segregation reports