California depreciation
California's Section 179 limit is far below the federal limit
For 2025 California instructions, the Section 179 deduction is limited to $25,000 and begins phasing out when qualifying property exceeds $200,000—well below current federal limits.
A federal Section 179 election can be useful while still creating a large California addback. Asset eligibility can also differ, so the state result should be reviewed before finalizing the election.
The dollar limits diverge
California's maximum and investment phaseout thresholds remain much lower than the federal amounts. A purchase program that fits entirely within the federal deduction may generate regular California depreciation over several years.
Software treatment can differ
California does not follow the expanded federal Section 179 treatment for off-the-shelf computer software. The invoice and asset classification should distinguish software, equipment, and service costs.
Entity and owner limits still apply
Pass-through entities make elections at the entity level, while owners can face separate taxable-income limitations. State and federal carryforwards should be tracked independently.
The election should be modeled before filing
Compare Section 179, bonus depreciation, and regular depreciation for federal purposes, then calculate the California adjustment and future state deductions before choosing the final mix.
Do not use the federal Section 179 amount on the California return. Build an asset-level state calculation and preserve the resulting carryforward and basis information.
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.