Florida Bonus Depreciation Rules: Add-Back, Recovery, and F-1120

Florida bonus depreciation rules require corporate taxpayers to add back every dollar of federal bonus depreciation claimed under IRC Section 168(k) when computing state taxable income, then recover that amount through equal subtractions spread over seven years.¹ You get the full deduction eventually. Florida just makes you take it on a slower schedule than the IRS does.

Who Has to Make the Add-Back

Florida’s corporate income tax applies to corporations and artificial entities, not to natural persons.² Sole proprietors, general partnerships, and LLCs taxed as partnerships are not subject to the corporate income tax, and the bonus depreciation add-back does not touch them. Florida has no personal income tax, so bonus depreciation on those federal returns flows through with no state adjustment.

C-corporations and S-corporations that file Florida Form F-1120 do have to make the add-back. A $50,000 exemption from corporate net income means smaller filers with modest profits may see limited practical impact, but the tracking obligation still applies.

How to Compute the Add-Back

The calculation is simpler than most taxpayers expect. You add back the full amount you deducted as bonus depreciation on your federal return. That is the entire add-back. You do not have to compute what standard MACRS depreciation would have been and subtract the difference.³

A concrete example. Your business buys $500,000 of equipment in 2026 and claims the 20% federal bonus depreciation, deducting $100,000 on the federal return. You also claim regular first-year MACRS depreciation on the remaining $400,000. For Florida, you add back the full $100,000. The MACRS depreciation stays untouched. Your Florida taxable income goes up by $100,000 in the year of acquisition.

The add-back requirement in Florida Statute 220.13(1)(e) covers all bonus depreciation claimed under IRC Sections 167 and 168(k) for property placed in service after December 31, 2007, and before January 1, 2027.¹ Federal bonus depreciation itself drops to zero for property placed in service on or after January 1, 2027, so the state add-back and the federal provision currently sunset on the same date.

Recovering the Deduction Over Seven Years

Florida does not permanently deny the deduction. Starting in the same taxable year you made the add-back, you subtract one-seventh of that amount from your Florida taxable income. The same one-seventh subtraction continues for each of the next six years, giving you seven annual subtractions in total.¹

Using the earlier example, the $100,000 add-back turns into a roughly $14,286 subtraction each year for seven years. By the end of year seven, you have recovered the entire amount.

One detail catches taxpayers off guard. The seven-year recovery continues even if you sell or dispose of the asset before the period ends. The statute states the subtraction applies “notwithstanding any sale or other disposition of the property” and “regardless of whether such property remains in service.”¹ Sell the equipment in year three and you still claim the annual one-seventh subtraction through year seven. That means tracking recovery schedules for assets that are no longer on your books.

The Qualified Improvement Property Exception

The seven-year recovery mechanism does not apply to bonus depreciation claimed on qualified improvement property as defined in IRC Section 168(e)(6).¹ Qualified improvement property generally covers interior improvements to nonresidential buildings, excluding elevators, escalators, and structural changes. For these assets, you still make the add-back, but there is no one-seventh annual subtraction. You claim regular MACRS depreciation on your Florida return over the asset’s recovery period instead. Businesses doing heavy tenant improvement or interior renovation work should flag this distinction early.

Section 179 as a Conforming Alternative

Florida’s treatment of the federal Section 179 deduction is more favorable. The statute required a similar add-back for Section 179 amounts exceeding $128,000, but only for taxable years beginning after December 31, 2007, and before January 1, 2015.¹ For 2026, no active add-back applies to Section 179 expensing, so Florida currently conforms to the federal deduction.

That opens a real planning opportunity. To the extent your asset purchases fit within the federal Section 179 limits, you can expense them immediately for both federal and Florida purposes with no state add-back. Section 179 carries lower caps than bonus depreciation historically offered, and the deduction cannot exceed your business’s taxable income for the year. Within those limits, though, Section 179 delivers the upfront Florida deduction that bonus depreciation cannot.

Reporting on Form F-1120

The add-back and recovery subtractions are reported on Florida Form F-1120.⁴ The add-back goes on Schedule I (additions to federal taxable income), specifically Line 21, where you enter the full amount claimed as a special depreciation allowance under IRC Section 168(k).⁵ The annual one-seventh recovery subtraction goes on Schedule II (subtractions from federal taxable income).⁶

If you placed assets in service across multiple years, each year’s add-back runs its own seven-year recovery schedule. Your Schedule II subtraction in any given year may combine overlapping recoveries from several prior years. A tracking spreadsheet listing the original add-back year, the total amount, and the remaining annual subtractions will save real trouble at filing time.

The 2026 Rate and Timing Cost

For property placed in service in 2026, the federal bonus depreciation rate is 20%, and it drops to zero in 2027 unless Congress acts. Qualified property includes both new and used tangible assets with a recovery period of 20 years or less: machinery, equipment, vehicles, and certain qualified improvement property. The federal deduction is mandatory for eligible assets unless you file an election out on Form 4562 by the due date of your return, and that election applies to every asset in the same class placed in service that year.⁷

At Florida’s 5.5% corporate income tax rate, the timing difference is real but modest.⁸ On a $100,000 add-back, you pay roughly an additional $5,500 in Florida tax in year one, and the annual subtractions give back about $786 per year over the next six years. You recover every dollar. The cost is the time value of that cash in the interim, and for businesses making large capital investments, it adds up.

1
Florida Senate. Florida Code 220.13 – Adjusted Federal Income Defined
2
The Florida Legislature. Florida Code 220.02 – Legislative Intent
3
Florida Department of Revenue. Tax Information Publication 25C01-01 – Florida Corporate Income Tax Adoption of 2025 Internal Revenue Code
4
Florida Department of Revenue. Corporate Income Tax
5
Florida Department of Revenue. Florida Corporate Income/Franchise Tax Return Instructions
6
Florida Department of Revenue. Florida Corporate Income Tax Adoption of 2024 Internal Revenue Code
7
Internal Revenue Service. Additional First Year Depreciation Deduction (Bonus) – FAQ
8
Florida Department of Revenue. Tax and Interest Rates