Delaware fully conforms to federal §168(k) bonus depreciation — including the 100% bonus restored by OBBBA for property acquired and placed in service after January 19, 2025. STR investors get 100% of the federal Year-1 deduction plus the full Delaware deduction at up to the 6.6% top marginal rate — no add-back required. On a $150,000 federal deduction, that's an additional $9,900 in Delaware state tax savings on top of $55,500 federal. For side-by-side context, the 50-state §168(k) conformity overview shows how Delaware stacks up against every other US jurisdiction.
Modeled on a $150,000 federal §168(k) deduction. Open the state conformity tool →
How Delaware Adopts §168(k) — The Rolling Conformity Mechanic
Delaware's conformity mechanic differs slightly from the classic rolling-conformity states, but produces the same result. Delaware defines taxable income by starting with federal AGI and applying a limited set of state-specific modifications (30 Del. C. §1102). Those modifications don't include a §168(k) add-back. Anything the federal government does to the depreciation deduction — accelerate it, phase it down, restore it — flows through to Delaware automatically.
When the One Big Beautiful Bill Act (OBBBA) restored 100% federal bonus depreciation for property acquired and placed in service after January 19, 2025, Delaware's federal-AGI starting point picked up the entire deduction with no state legislative action. The result is a rare planning environment: the federal §168(k) benefit and the Delaware §168(k) benefit move as a single lever.
The mechanic in practice: compute federal taxable income with the full §168(k) deduction. Delaware taxable income starts from federal AGI and inherits the deduction unchanged. Depreciation on the Delaware return matches federal exactly. Basis is identical between the two returns. No separate Delaware depreciation schedule to maintain, no addition modification, no subtraction modification, no divergence at disposition.
Worked Example — $150,000 Federal Deduction Plus Extra Delaware Savings
Consider an investor buying a $950,000 STR beach house in Rehoboth Beach, Bethany Beach, or Dewey Beach, running a cost seg-style analysis, and identifying $150,000 in 5-year and 15-year bonus-eligible property (kitchen finishes, appliances, FF&E, hot tub, deck, landscaping). The federal §168(k) deduction is $150,000 in Year 1 — and Delaware inherits the entire amount.
Assumptions: Federal marginal rate 37% · Delaware top marginal rate 6.6% · Bonus depreciation acquired and placed in service after January 19, 2025 · STR loophole (§469) qualification confirmed for federal purposes.
| Line | Federal return | Delaware return |
|---|---|---|
| §168(k) Year-1 deduction | $150,000 | $150,000 (full conformity) |
| Year-1 tax rate | 37% | 6.6% top |
| Year-1 tax savings | $55,500 | $9,900 |
| Combined Year-1 savings | $65,400 | |
| Recovery mechanics | Full deduction in Year 1, both returns · basis matches | |
The Delaware $9,900 is the extra state savings you'd miss out on in a decoupled state. Delaware's 6.6% top rate is among the higher full-conformer rates in the country, which means the state benefit is meaningful on large cost seg deductions.
The Statute Explained
Delaware's federal-AGI starting point is a stable approach. Because there's no fixed conformity date to track and no §168(k)-specific modification, investors can rely on the state benefit tracking whatever the federal government does with bonus depreciation. This is especially valuable given the volatility of federal bonus depreciation policy over the last decade — phase-down, sunset, restoration by OBBBA.
How Delaware Compares to Decoupled States
Roughly half of US states plus DC decouple from §168(k) — including Delaware's mid-Atlantic neighbors. In a decoupled state, an STR investor with a $150,000 bonus deduction would add back 100% on the state return and lose the Year-1 state tax savings entirely. Consider the gap with Delaware's neighbors:
- Delaware — full conformer at 6.6% → +$9,900 Year-1 state savings
- New Jersey — decoupled at 10.75% → -$16,125 Year-1 state miss
- Pennsylvania — decoupled at 3.07% flat → -$4,605 Year-1 state miss
- DC — decoupled at 10.75% → -$16,125 Year-1 state miss
The swing between Delaware and neighboring DC on the same $150,000 deduction is roughly $26,025 in Year-1 state tax cash flow. For a portfolio investor deciding between metro-area STR markets, Delaware's conformity is a real underwriting factor.
Use the state conformity tool to compare Delaware against any other state at any federal deduction amount, or browse the full 50-state hub for a side-by-side view.
What This Means for Your STR Purchase Decision
Delaware's beach markets — Rehoboth, Bethany, Dewey, Fenwick Island — combine strong summer nightly rates with one of the most favorable state tax regimes for bonus depreciation in the mid-Atlantic. Three practical implications:
- Federal $55,500 and Delaware $9,900 stack cleanly. On a $150,000 bonus-eligible deduction, combined Year-1 tax savings hit $65,400 — the state doesn't take back any of the federal acceleration.
- Delaware's rate is higher than most full conformers. At 6.6%, Delaware's top rate produces a bigger state benefit than most full-conformity states — better than Alabama (5%), Colorado (4.4%), or Kansas (5.58%) on the same deduction.
- Tax prep is simpler. No separate Delaware depreciation schedule, no addition/subtraction modifications, no basis divergence at sale. That saves preparer hours and reduces error risk.
Before you write an offer on a Rehoboth or Bethany Beach STR, run the address on your property — the report models the full federal Year-1 deduction and confirms Delaware's conformity means you keep every dollar on the state return too.
Analyze a specific Delaware property
Run any Delaware STR listing through DepreciMax's $99 property report — line-item finish classification, federal §168(k) modeling, and Delaware full-conformity confirmation included.
Frequently asked questions
Does Delaware conform to federal §168(k) bonus depreciation in 2026?
Yes. Delaware fully conforms — including the 100% bonus restored by OBBBA for property acquired and placed in service after January 19, 2025. Delaware calculates taxable income from federal AGI with no §168(k) modification.
How much extra state tax savings does Delaware conformity produce for a short-term rental investor?
On a $150,000 federal §168(k) deduction, Delaware's 6.6% top rate produces an additional $9,900 in Year-1 state savings on top of the federal $55,500. Combined Year-1 tax savings: about $65,400.
What is the Delaware statute for §168(k) conformity?
30 Del. C. §1102 defines Delaware taxable income as federal AGI with limited modifications — none of which is a §168(k) add-back.
Does Delaware conformity help the short-term rental loophole?
Yes. The federal STR loophole (§469) already lets you deduct rental losses against W-2 income at the federal level. Delaware's conformity means the same acceleration reduces Delaware taxable income too — producing an additional 6.6% state tax savings.
Is any add-back required on the Delaware return?
No. Delaware starts from federal AGI with no §168(k) modification. Depreciation, basis, and disposition mechanics all match federal.
Did OBBBA affect Delaware's §168(k) treatment?
Yes, favorably. OBBBA (P.L. 119-21) restored 100% federal bonus depreciation for property acquired and placed in service after January 19, 2025 — and because Delaware conforms via federal AGI, that restoration flows through automatically.
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.
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