Connecticut does not conform to federal §168(k) — 100% of your federal bonus depreciation must be added back on the Connecticut personal income tax return. The federal deduction is unaffected. But Connecticut is milder than most decoupled states: for property placed in service after September 27, 2017, you get to subtract 25% of the added-back amount in each of the four succeeding years, recovering the full deduction over 5 years total. See the full 50-state conformity map to compare Connecticut's treatment to every other US jurisdiction.
Modeled on a $150,000 federal §168(k) deduction.
How Connecticut Treats §168(k) — The Add-Back Mechanic
Connecticut individuals must add back federal §168(k) bonus depreciation on Form CT-1040 for tax years beginning on or after January 1, 2002. The statutory basis is Conn. Gen. Stat. §12-701(a)(20)(A)(ix). For years, this was a straight 100% add-back with recovery only through the normal Connecticut MACRS deduction over the asset's life.
The rule changed materially for property placed in service after September 27, 2017. Under updated Connecticut guidance (OCG-5), taxpayers making the §168(k) add-back can subtract 25% of the added-back amount in each of the four succeeding taxable years — which means the full federal bonus is recovered on the Connecticut return over 5 years total (Year 1 add-back, then years 2, 3, 4, 5 subtractions at 25% each). This is a much shorter deferral than a state like Massachusetts or California, where the timing loss stretches over 5-15-27.5-year MACRS lives.
For an STR investor placing a property in service in 2026, the mechanics are: full federal 100% bonus under OBBBA, full Connecticut add-back in Year 1, then Connecticut subtractions of 25% of the bonus in Years 2 through 5. By Year 6, Connecticut and federal cumulative depreciation match.
Worked Example — $150,000 Federal Deduction on a Connecticut STR
Assume an STR investor buys a Mystic Seaport property, closes 2026, and identifies $150,000 in bonus-eligible 5-year and 15-year assets through a cost-segregation-quality report.
| Year | Federal deduction | Connecticut modification | CT tax impact @ 6.99% |
|---|---|---|---|
| Year 1 (place in service) | $150,000 (100% bonus) | +$150,000 add-back | -$10,485 |
| Year 2 | Regular MACRS only | -$37,500 subtraction (25% of add-back) | +$2,621 |
| Year 3 | Regular MACRS only | -$37,500 subtraction | +$2,621 |
| Year 4 | Regular MACRS only | -$37,500 subtraction | +$2,621 |
| Year 5 | Regular MACRS only | -$37,500 subtraction | +$2,621 |
Cumulatively, Connecticut and federal treatment reconverge after Year 5. The Year-1 cash-flow hit is real — $10,485 in deferred state tax savings — but the timing loss is the time value of money on that deferral, not a permanent loss. That's a materially better structure than pure decoupling, where recovery is spread over 27.5 years.
Pre-purchase, you can run the address on your property to see the combined federal-and-state after-tax cash flow before writing an offer.
The Statute Explained
Connecticut is a rolling-conformity state generally — Connecticut adjusted gross income begins with federal AGI. But the state statutorily requires an add-back of federal §168(k) under Conn. Gen. Stat. §12-701(a)(20)(A)(ix) for the personal income tax, and under §12-217(b) for the corporate business tax. The 4-year subtraction schedule for post-September 27, 2017 property was adopted after the federal Tax Cuts and Jobs Act (TCJA) expanded §168(k) — Connecticut's compromise between full decoupling and full conformity.
OBBBA (P.L. 119-21) restored 100% federal bonus for property acquired and placed in service after January 19, 2025. Connecticut's add-back structure applies to this restored federal deduction just as it did to pre-OBBBA bonus. The 4-year recovery mechanic still applies, since it is keyed to the September 27, 2017 placed-in-service threshold, not to a specific IRC date.
How Connecticut Compares to Federal-Conforming States
Roughly half the country conforms to federal §168(k) via rolling IRC conformity. In a full conformer like Colorado (4.4% flat) or Alabama (5.0% top marginal), the same $150,000 federal bonus produces $6,600 or $7,500 in additional Year-1 state savings on top of the federal $55,500 — the stacking benefit Connecticut STR investors don't get in Year 1.
But Connecticut sits in a unique middle position: the 4-year recovery mechanic means the timing loss is much smaller than in fully decoupled states where recovery stretches over MACRS lives of 5, 15, or 27.5 years. Compare against how Massachusetts does it (100% add-back, recovery over MACRS life at 9%), or use the state conformity tool to run Connecticut side-by-side with any other state at any federal deduction amount.
What This Means for Your STR Purchase Decision
For an STR investor evaluating a Mystic, Stonington, or Litchfield Hills property, Connecticut's non-conformity is a Year-1 cash-flow hit but not a permanent one. Two takeaways:
First, the federal Year-1 bonus deduction remains dominant — Connecticut takes nothing away from the federal $55,500 in Year-1 savings on a $150,000 bonus. Second, the 4-year Connecticut recovery means the state timing loss on the same bonus deduction is roughly $10,485 in Year 1, recovered at $2,621 per year over years 2-5. Pre-purchase, model the 5-year state cash flow as part of your after-tax return.
Before writing an offer on any Connecticut STR placed in service after January 19, 2025, run the address on your property to get a line-item breakdown before committing.
Analyze a specific Connecticut property
Run any Connecticut STR listing through DepreciMax's $99 property report — line-item finish classification closely calibrated to a formal cost seg study, includes Connecticut-specific add-back and 4-year recovery math.
Frequently Asked Questions
Does Connecticut plan to conform to §168(k) in 2026?
No. Connecticut has required an add-back of federal §168(k) bonus depreciation on the personal income tax return since 2002. However, for property placed in service after September 27, 2017, taxpayers may subtract 25% of the added-back amount in each of the four succeeding taxable years — full recovery over 5 years.
Can I still take federal bonus depreciation if I live in Connecticut?
Yes. The federal §168(k) deduction is unaffected. A Connecticut resident STR investor placing a property in service after January 19, 2025 can claim the full 100% federal bonus deduction under OBBBA (P.L. 119-21). Connecticut only changes the state-return calculation and timing.
How do I report the Connecticut §168(k) add-back?
Connecticut individuals add back federal §168(k) bonus depreciation on Form CT-1040 Schedule 1. For property placed in service after September 27, 2017, take 25% of the addback as a subtraction modification on Form CT-1040 in each of the four subsequent tax years. Connecticut Office of the Commissioner Guidance OCG-5 explains the mechanics.
What happens on sale — does Connecticut recapture the difference?
Connecticut basis and federal basis reconverge as the 25%-per-year subtractions catch up over 4 years. On sale after Year 5, Connecticut and federal gain are effectively equal. If the property is sold before the full add-back has been recovered through subtractions, any remaining subtraction is generally allowed in the year of disposition.
Does Connecticut's decoupling apply to §179 too?
Connecticut conforms to federal §179 expensing (with a partial add-back that has been phased down). The §168(k) decoupling under Conn. Gen. Stat. §12-701(a)(20)(A)(ix) is separate and specific to bonus depreciation.
Every state's §168(k) position, in one place
Interactive map, sortable table, and deep-dive guide for each of the 51 jurisdictions — post-OBBBA verified.
See the 50-state map →Connecticut statute: Conn. Gen. Stat. §12-701(a)(20)(A)(ix), §12-217(b); Connecticut DRS OCG-5 (portal.ct.gov). Federal authority: IRC §168(k), as amended by the One Big Beautiful Bill Act (P.L. 119-21) restoring 100% bonus depreciation for property acquired and placed in service after January 19, 2025. Nothing in this article is tax advice. Consult a CPA who specializes in real estate before making investment decisions based on state-conformity projections.