Bonus depreciation in District of Columbia

The rule

Follows federal §168(k) bonus

No

Federal bonus added back in year one

100%

State §179 cap

$25,000

DC flatly disallows the §168(k) allowance — and, post-OBBBA, the §168(n) qualified-production-property allowance — and caps §179 at the lesser of $25,000 or actual cost. An individual adds the federal bonus plus the excess §179 back on D-40 Schedule I, Calculation A, Line 3, and recovers it as the excess of DC over federal depreciation on Calculation B, Line 5, over the asset's remaining life on the un-reduced DC basis. On disposition, DC gain/loss is recomputed excluding any bonus depreciation, so the add-back is not silently clawed back at sale.

What that costs, worked

Take a cost-segregation study that produces $250,000 of federal bonus depreciation and $50,000 of §179 in the first year — a realistic result on a single short-term rental.

Federal bonus depreciation

$250,000

Added back on the District of Columbia return

$250,000

§179 over the state cap, added back

$25,000

District of Columbia taxable income is higher by

$275,000

A year-one figure. The state-side recovery of the added-back amount in later years is a separate schedule and is not modelled here.

Where this sits in the year

State conformity is the last thing that happens to a deduction, not the first. Before it matters, the property has to clear the seven-day average-stay test and the material participation tests, and the loss has to survive basis, at-risk, and the §461(l) cap — $256,000 single and $512,000 married filing jointly for 2026. The path is laid out in does my short-term rental qualify.

Common questions

Does District of Columbia allow bonus depreciation?

No — District of Columbia does not follow the federal bonus depreciation rules. 100% of the federal bonus deduction is added back to your District of Columbia taxable income in year one, so your state bill does not fall the way your federal bill does. It also caps Section 179 expensing at $25,000, below the federal limit.

Does this change my federal deduction?

No. State conformity affects only your state return. The federal bonus deduction is unchanged — which is why a cost-segregation study can still be worth doing in a state that decouples, just for a smaller total benefit.

Is the added-back amount lost?

Not usually. States that require an add-back generally let you recover the amount through ordinary depreciation on the state's own schedule in later years. DC flatly disallows the §168(k) allowance — and, post-OBBBA, the §168(n) qualified-production-property allowance — and caps §179 at the lesser of $25,000 or actual cost. An individual adds the federal bonus plus the excess §179 back on D-40 Schedule I, Calculation A, Line 3, and recovers it as the excess of DC over federal depreciation on Calculation B, Line 5, over the asset's remaining life on the un-reduced DC basis. On disposition, DC gain/loss is recomputed excluding any bonus depreciation, so the add-back is not silently clawed back at sale.