Maine does not conform to federal §168(k) — 100% of your federal bonus depreciation must be added back on the Maine state return. The federal deduction is unaffected. Maine is unusual: alongside the add-back, taxpayers claiming federal bonus can also claim the Maine Capital Investment Credit (MCIC), which offsets a portion of the state timing loss with a direct credit against Maine tax. Visit the full state conformity hub to compare Maine's treatment to every other US jurisdiction.
Modeled on a $150,000 federal §168(k) deduction; MCIC individual rate 1.2% for TY 2025.
How Maine Treats §168(k) — The Add-Back Mechanic
Maine requires a 100% add-back of federal §168(k) bonus depreciation on the state return under 36 M.R.S. §5122(1)(BB). The federal deduction is unaffected — the STR investor claims the full 100% federal bonus on Schedule E — but Maine imports federal AGI and then adds back the entire §168(k) amount.
Recovery is via subtraction modification over the property's depreciable life. Because Maine's top marginal rate is 7.15%, the gross Year-1 timing loss on a $150,000 bonus is roughly $10,725. Maine partly cushions this with the Maine Capital Investment Credit (MCIC) under 36 M.R.S. §5219-NN. For individuals in TY 2025, the credit rate is 1.2% of the federal bonus — a direct-dollar credit against Maine tax, not a deduction. That produces roughly $1,800 in cash back on a $150,000 bonus and reduces the net Year-1 penalty to about $8,925.
This "add-back with a credit" structure is unique among decoupled states. Most states either conform (Year-1 savings) or decouple (Year-1 timing miss); Maine does both simultaneously — full add-back on one hand, partial cash credit on the other.
Worked Example — $150,000 Federal Deduction on a Maine STR
Assume an STR investor buys a Bar Harbor cabin, closes 2026, and identifies $150,000 in bonus-eligible 5-year and 15-year assets through a cost-segregation-quality report.
| Line | Federal | Maine |
|---|---|---|
| Year 1 §168(k) deduction (bonus-eligible portion) | $150,000 | $0 (100% add-back) |
| Year 1 tax savings @ 37% federal / 7.15% ME top | $55,500 | $0 |
| Year 1 Maine MACRS recovery (approx.) | — | ~$16,900 (blended 5/15/27.5-yr MACRS) |
| Year 1 Maine Capital Investment Credit (1.2% of federal bonus) | — | +$1,800 credit |
| Net Year-1 Maine state miss | — | ~$8,925 ($10,725 gross − $1,800 MCIC) |
| Years 2 through end of asset life — ME subtraction modification | — | Remaining ~$133,100 recovered ratably |
The net Year-1 Maine miss of roughly $8,925 is smaller than the gross 7.15%-rate calculation suggests, thanks to the MCIC offset. Pre-purchase, you can run the address on your property to see the combined federal-and-state after-tax cash flow — including the Maine credit.
The Statute Explained
Maine uses a rolling IRC conformity approach with a statutory §168(k) carve-out. Under 36 M.R.S. §5122(1)(BB), federal §168(k) bonus depreciation is added back to Maine income; the corresponding subtraction modification is available over the property's normal MACRS life. Separately, 36 M.R.S. §5219-NN authorizes the Maine Capital Investment Credit — a direct credit against Maine tax equal to a statutory percentage of the federal bonus.
The MCIC rate has changed multiple times over the years and can vary by taxpayer type (individual vs. corporate). The current 1.2% individual rate for TY 2025 is set by the Maine Legislature and confirmed in the Maine Revenue Services 2022 bonus depreciation guidance and subsequent updates. OBBBA (P.L. 119-21) restored 100% federal bonus for property acquired and placed in service after January 19, 2025 — Maine's add-back and MCIC both apply to this restored federal deduction.
How Maine 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 Maine STR investors don't get in Year 1.
But Maine sits in a genuinely unique middle position among decoupled states: 100% add-back like Massachusetts or Virginia, plus the MCIC cash credit that no other state offers. Compare against how Massachusetts does it (pure add-back, no credit), or use the state conformity tool to run Maine 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 Bar Harbor, Kennebunkport, or Rangeley property, Maine's non-conformity is a real state-timing hit — but smaller than the headline rate suggests once you factor in the MCIC. Two takeaways:
First, the federal Year-1 bonus deduction remains dominant — Maine takes nothing away from the federal $55,500 in Year-1 savings on a $150,000 bonus. Second, the Maine net Year-1 miss of roughly $8,925 (after MCIC) sits in the middle of the decoupled-state pack and should be baked into your after-tax return model. The MCIC is easy to miss on the state return, so confirm your CPA claims it.
Before writing an offer on any Maine 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 Maine property
Run any Maine STR listing through DepreciMax's $99 property report — line-item finish classification closely calibrated to a formal cost seg study, includes Maine-specific add-back and MCIC math.
Frequently Asked Questions
Does Maine plan to conform to §168(k) in 2026?
No. Maine requires a 100% add-back of federal §168(k) under 36 M.R.S. §5122(1)(BB). Instead of conformity, Maine offers a partial cash offset via the Maine Capital Investment Credit (MCIC) at 36 M.R.S. §5219-NN. The credit rate for individuals is currently 1.2% of federal bonus for tax year 2025.
Can I still take federal bonus depreciation if I live in Maine?
Yes. The federal §168(k) deduction is unaffected. A Maine 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). Maine changes both the state-return calculation and offers a partial cash-back credit.
How do I report the Maine §168(k) add-back and MCIC?
Maine taxpayers add back federal §168(k) bonus depreciation on the Maine Form 1040ME addition modification schedule. Recovery is via subtraction modification over the property's depreciable life. Separately, taxpayers claim the Maine Capital Investment Credit on the MCIC schedule at 1.2% of federal bonus (2025 individual rate).
What happens on sale — does Maine recapture the difference?
Maine basis is higher than federal basis by the unrecovered add-back amount. On sale, Maine gain is correspondingly smaller than federal gain, so the state timing difference reverses through subtractions across the depreciation period and, if not fully absorbed, through a lower Maine gain at disposition.
Does Maine's decoupling apply to §179 too?
Maine conforms to federal §179 expensing at the federal dollar limit. The §168(k) decoupling under 36 M.R.S. §5122(1)(BB) 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 →Maine statute: 36 M.R.S. §5122(1)(BB), §5219-NN; Maine Revenue Services Bonus Depreciation Guidance 2022 (maine.gov/revenue). 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.