Rhode Island does not conform to federal §168(k) bonus depreciation. The RI Division of Taxation issued emergency regulations in December 2025 formally decoupling from OBBBA for both personal income tax and business corporation tax. STR investors get the full federal deduction but must add back 100% on the Rhode Island return. On a $150,000 federal deduction, that costs about $8,985 in Year-1 state tax timing. See the full 50-state conformity map to compare Rhode Island's treatment to every other US jurisdiction.
Modeled on a $150,000 federal §168(k) deduction. Open the state conformity tool →
How Rhode Island Treats §168(k) — The Add-Back Mechanic
Rhode Island is one of a small group of states that actively decoupled from OBBBA after it passed. When the One Big Beautiful Bill Act restored 100% bonus depreciation permanently for property acquired and placed in service after January 19, 2025, the Rhode Island Division of Taxation moved in December 2025 to disallow that acceleration for state tax purposes.
The mechanic is straightforward. An investor computes federal taxable income using the full §168(k) deduction. On the Rhode Island return, the entire apportioned bonus amount is added back to state taxable income. Rhode Island depreciation is then recomputed using standard MACRS without the bonus election — 5-year, 15-year, or 39-year recovery by asset class. The difference between federal and Rhode Island depreciation is picked up over the property's normal life through subtraction modifications in years 2 forward.
This is a timing shift, not a permanent loss. The full deduction eventually flows through on the Rhode Island return. The economic cost is the time value of money on the deferred state tax savings — meaningful, but not the same as losing the deduction outright.
Worked Example — $150,000 Federal Deduction on a Rhode Island STR
Consider an investor buying a $1.2M oceanfront STR in Newport, running a cost seg-style analysis, and identifying $150,000 in 5-year and 15-year bonus-eligible property (finishes, appliances, FF&E, outdoor amenities). The federal §168(k) deduction is $150,000 in Year 1.
Assumptions: Federal marginal rate 37% · Rhode Island top marginal rate 5.99% · Bonus depreciation acquired and placed in service after January 19, 2025 · STR loophole (§469) qualification confirmed for federal purposes.
| Line | Federal return | Rhode Island return |
|---|---|---|
| §168(k) Year-1 deduction | $150,000 | $0 (100% add-back) |
| Year-1 tax rate | 37% | 5.99% |
| Year-1 tax savings | $55,500 | $0 |
| Year-1 state savings missed | — | ~$8,985 |
| Recovery | N/A (fully deducted) | MACRS over 5/15/39 years |
The $8,985 state miss is deferred, not lost — Rhode Island depreciation exceeds federal in years 2 onward until fully recovered. The federal $55,500 Year-1 savings is unaffected by Rhode Island's decoupling.
The Statute Explained
Rhode Island's decoupling operates through both statute and regulation. R.I. Gen. Laws §44-30-12(b)(9) requires an addition modification for §168(k) amounts on the personal income tax base. R.I. Gen. Laws §44-61-1 does the same for the business corporation tax. The December 2025 emergency regulations (280-RICR-20-55-17 for PIT and 280-RICR-20-25-16 for BCT) implement the decoupling with respect to OBBBA specifically — closing what would otherwise have been an automatic conformity pathway.
How Rhode Island Compares to Federal-Conforming States
Of the 50 US states plus DC, roughly half conform fully to federal §168(k) — including neighbors like Delaware, which flows the entire federal bonus through to the state return with no add-back. Rhode Island sits in the decoupled camp with Massachusetts, New Jersey, and New York — but its 5.99% top rate puts the dollar impact in the middle of the pack, not near the top.
Use the state conformity tool to compare Rhode Island 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
Rhode Island's decoupling doesn't change whether an STR is a good deal. It changes when the state-level tax benefit shows up. Three practical implications:
- Model both federal and state cash flows separately. A Newport STR still delivers the full $55,500 federal Year-1 savings on a $150,000 bonus-eligible finish package — the federal number is where the STR loophole lives.
- Track basis differently for state and federal. Rhode Island basis and federal basis will diverge for the life of the property. On disposition, expect a Rhode Island-specific gain/loss recalculation.
- Don't confuse decoupling with disqualification. Every Rhode Island STR investor still qualifies for the full federal §168(k) deduction. The state tax is a timing question, not an eligibility question.
Before you write an offer, run the address on your property — the report models the full federal Year-1 deduction and lets you factor Rhode Island's timing shift into your underwriting.
Analyze a specific Rhode Island property
Run any Rhode Island STR listing through DepreciMax's $99 property report — line-item finish classification, federal §168(k) modeling, and Rhode Island timing math included.
Frequently asked questions
Does Rhode Island conform to federal §168(k) bonus depreciation in 2026?
No. Rhode Island decouples from federal §168(k). Emergency regulations issued December 2025 formally disallow OBBBA bonus depreciation for both PIT and BCT. STR investors add back 100% on the state return.
How much does Rhode Island non-conformity cost a short-term rental investor?
On a $150,000 federal §168(k) deduction with Rhode Island's 5.99% top marginal rate and 100% add-back, the Year-1 state miss is approximately $8,985. The federal $55,500 Year-1 savings at the 37% federal bracket is unaffected.
What is the Rhode Island statute for §168(k) non-conformity?
R.I. Gen. Laws §44-30-12(b)(9) (PIT) and §44-61-1 (BCT), implemented through 280-RICR-20-55-17 and 280-RICR-20-25-16. The December 2025 emergency regulations explicitly decouple from OBBBA (H.R. 1).
Does Rhode Island non-conformity kill the short-term rental loophole?
No. The STR loophole is a federal §469 mechanism. Rhode Island's add-back only changes state-level Year-1 timing. The federal deduction and the federal STR loophole benefit are unaffected.
When did Rhode Island decouple from OBBBA?
The RI Division of Taxation issued emergency regulations on December 15, 2025, formally decoupling from H.R. 1 (OBBBA) with respect to §168(k) bonus depreciation and §181 production expensing. Both PIT and BCT taxpayers are affected.
How do I recover the Rhode Island add-back over time?
Through standard MACRS depreciation on the Rhode Island return over the property's normal recovery life (5, 15, or 39 years). Rhode Island depreciation in years 2 onward will exceed federal until the difference is fully recovered — a timing shift, not a permanent loss.
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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