Ohio is the third partial-conformer after Minnesota and North Carolina — Ohio's default rule adds back 5/6 (~83.3%) of federal §168(k) in Year 1 and subtracts 1/5 of the add-back in each of the next 5 years. Ohio moved to a flat 2.75% individual rate on January 1, 2026 per HB 96, which reduces the dollar impact of the add-back. On a $150,000 federal deduction, the Year-1 Ohio state miss is ~$3,437. For side-by-side context, the 50-state §168(k) conformity overview shows how Ohio stacks up against every other US jurisdiction.
Modeled on a $150,000 federal §168(k) deduction with the default 5/6 add-back at Ohio's new 2.75% flat rate. Run your own numbers in the Conformity Tool →
Hocking Hills is the Ohio market in the DepreciMax Top 50
The DepreciMax 2026 STR Bonus Depreciation Study ranks 197 US STR markets by median bonus-eligible percentage. Hocking Hills, OH ranks #15 — the highest-scoring Ohio market, and one of the strongest cabin-STR markets in the Midwest. Hocking Hills combines very low land value ratios, heavy 15-year land-improvement content (hot tubs, decks, fire pits, pergolas, sauna outbuildings), and FF&E-heavy furnished rentals — all classic §168(k) accelerators.
The federal §168(k) math is exceptional. But the Ohio state layer requires a 5/6 add-back — which is why Ohio joins Minnesota (80% / 5-year) and North Carolina (85% / 5-year) as the only three partial-conformer states. The 5/6 mechanic is favorable relative to a full decoupler, because Year 1 allows a partial state deduction and full recovery arrives in 5 years instead of stretching over the property's MACRS life.
Ohio's three add-back variants — 5/6, 2/3, and 6/6
Ohio Rev. Code §5747.01(A)(20) provides a graduated add-back structure. Most individual STR investors fall under the default 5/6 rule, but two variants exist for specific taxpayer profiles:
| Variant | Add-back % | When it applies | Recovery schedule |
|---|---|---|---|
| Default (5/6) | 83.3% | All Ohio individual taxpayers claiming federal §168(k), unless one of the two variants below applies. | 1/5 subtraction each year, years 2 through 6. |
| Growing-taxpayer (2/3) | 66.7% | Taxpayer's Ohio withholding tax remittances in the current year exceed prior year by at least 10%. Rarely applies to individual STR investors. | 1/2 subtraction each year, years 2 and 3. |
| Federal-NOL (6/6) | 100% | Federal §168(k) deduction creates a federal net operating loss (NOL). Applies when bonus depreciation exceeds all other income sources at the federal level. | 1/5 subtraction each year, years 2 through 6. |
Ohio HB 96 — the 2026 move to a flat 2.75% individual rate
Ohio HB 96 moved Ohio's individual income tax to a flat 2.75% rate effective January 1, 2026. Prior to 2026, Ohio's individual tax was a graduated schedule topping at 3.125%. The 5/6 add-back mechanic is unchanged, but the state tax rate applied to the added-back income is materially lower.
Practical effect for Hocking Hills investors placing property in service in 2026: the same $150,000 federal §168(k) deduction that would have produced ~$3,906 in Year-1 state miss at the pre-HB-96 3.125% top rate now produces ~$3,437 at the new 2.75% flat rate. Marginal difference, but a favorable one — and it means the pre-2026 vs post-2026 comparison in older CPA memos and cost-seg blog posts is stale.
How much the Ohio 5/6 add-back costs at three deduction sizes
Under the default 5/6 rule at Ohio's new 2.75% flat rate, the Year-1 state miss is 5/6 × federal deduction × 2.75%. Three example STR purchase scenarios in Hocking Hills:
| Federal §168(k) deduction | Federal Y1 savings (37%) | OH Y1 state miss (5/6 × 2.75%) | OH Y2-Y6 recovery (per year) |
|---|---|---|---|
| $50,000 (small cabin, ~$250K purchase) | $18,500 | -$1,146 | +$229 |
| $150,000 (mid Hocking Hills cabin, ~$700K) | $55,500 | -$3,437 | +$687 |
| $500,000 (luxury Hocking Hills compound, ~$1.7M) | $185,000 | -$11,458 | +$2,292 |
The Year-1 miss is fully recovered by end of Year 6 via 1/5 subtractions on the Ohio return. Total 5-year state deduction equals the full federal §168(k) amount — the mechanic just delays the state timing. Run any purchase price through the Ohio Conformity Tool.
Ohio vs. the other two partial-conformer states
Only three US states are partial conformers to §168(k). All three use similar 5-year recovery schedules but with different Year-1 add-back percentages and different rate structures:
- Minnesota — 80% add-back at 9.85% top marginal rate. Year-1 miss on $150K deduction: ~$11,820. See the Minnesota conformity guide.
- North Carolina — 85% add-back at 3.99% flat rate. Year-1 miss on $150K deduction: ~$5,419. See the North Carolina conformity guide.
- Ohio — 5/6 (83.3%) add-back at new 2.75% flat rate. Year-1 miss on $150K deduction: ~$3,437. The lowest-friction partial-conformer at scale in 2026.
Ohio's HB 96 rate cut effective January 2026 puts Ohio in the strongest partial-conformer position for individual STR investors. Compare against sibling markets in the Conformity Tool.
What OBBBA changed for Ohio
OBBBA (P.L. 119-21, July 2025) restored 100% federal §168(k) permanently for property placed in service on or after January 19, 2025. Ohio's rolling IRC conformity picked up the federal §168(k) restoration — but the 5/6 add-back mechanic in §5747.01(A)(20) is a separate carve-out that continues to apply. So the federal bonus is fully available; the Ohio 5/6 add-back also fully applies.
The precedent for a state affirmatively excluding OBBBA is California's SB 711 (October 2025), which retained a full 100% decoupling — see the California conformity guide. Ohio did not follow California's lead. The 5/6 add-back rule is unchanged and continues to operate as it has since the mid-2000s.
Practical mechanics — filing Ohio IT 1040 with bonus depreciation
The Ohio depreciation workflow for a §168(k)-claiming individual STR investor under the default 5/6 rule:
- Claim federal §168(k) on federal Form 4562 as normal. This drives the federal Schedule E loss that offsets W-2 income under the STR loophole.
- On Ohio IT 1040, add back 5/6 of the federal §168(k) deduction as an addition to Ohio adjusted gross income.
- In each of the next 5 years (years 2 through 6), subtract 1/5 of the added-back amount from Ohio adjusted gross income.
- If the federal §168(k) deduction creates a federal NOL, use the 6/6 (100%) add-back variant instead. Confirm NOL status with a licensed CPA before filing.
- Ohio depreciation basis and federal depreciation basis are the same for disposition purposes under the 5/6 mechanic — no separate state basis to track (unlike full-decoupler states).
The bigger picture: §168(k) is one lever in a broader accelerated-depreciation strategy. See our accelerated depreciation explained guide for how MACRS, §168(k), and §179 stack for a real estate investor.
Related state conformity guides
Model Ohio at any deduction size
Free interactive tool — pick Ohio, adjust the federal deduction amount, see the 5/6 add-back and 5-year recovery schedule.
Open the Conformity Tool →Analyze a Hocking Hills listing
DepreciMax's $99 property report — line-item finish classification with Ohio-specific state impact math including 5/6 mechanics.
Analyze a property →Frequently asked questions
Does Ohio conform to federal §168(k) bonus depreciation in 2026?
Partially. Ohio is a partial conformer — the default add-back is 5/6 (~83.3%) of federal §168(k) in Year 1, with 1/5 subtracted in each of the next 5 years. A 2/3 variant applies for growing taxpayers and a 6/6 variant for federal NOL scenarios.
How does Ohio's 5/6 add-back rule work for STR investors?
On a $150,000 federal §168(k) deduction, an Ohio STR investor adds back $125,000 (5/6) to Ohio taxable income in Year 1 and allows $25,000 (1/6) as an Ohio bonus deduction. In each of the next 5 years, $25,000 is subtracted (1/5 of the add-back) — full recovery in 5 years.
How much does Ohio partial conformity cost a Hocking Hills STR investor?
On a $150,000 federal §168(k) deduction with Ohio's new 2.75% flat rate and default 5/6 add-back, the Year-1 state miss is ~$3,437. Federal savings of ~$55,500 at the 37% bracket are unaffected. Recovered at $687/year over 5 years.
What did Ohio HB 96 change for individual income tax?
HB 96 moved Ohio's individual income tax to a flat 2.75% rate effective January 1, 2026 (from a graduated schedule topping at 3.125%). The 5/6 add-back mechanic is unchanged, but the tax rate applied to the added-back income is lower.
What is Ohio's 2/3 add-back rule for growing taxpayers?
A 2/3 (~66.7%) add-back applies if the taxpayer's Ohio withholding tax remittances in the current year exceed the prior year by at least 10%. Most individual STR investors don't qualify — it targets business taxpayers with growing payrolls.
What is Ohio's 6/6 add-back rule for federal NOL scenarios?
If the federal §168(k) deduction creates a federal net operating loss, Ohio requires a full 6/6 (100%) add-back rather than the default 5/6. Applies to STR investors whose bonus depreciation exceeds their non-STR income at the federal level.
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 →