Definitive 2026 breakdown of New Jersey's treatment of federal IRC §168(k) 100% bonus depreciation for short-term rental investors. Verified against primary state DOR sources and cross-referenced to the DepreciMax state conformity dataset.
| Scenario | Federal §168(k) deduction | Federal tax savings (32% bracket) | Federal tax savings (37% bracket) | New Jersey state timing loss |
|---|---|---|---|---|
| Small STR — $50,000 federal deduction | $50,000 | $16,000 | $18,500 | $5,375 |
| Typical STR — $150,000 federal deduction | $150,000 | $48,000 | $55,500 | $16,125 |
| Luxury/multi-property — $300,000 federal deduction | $300,000 | $96,000 | $111,000 | $32,250 |
"New Jersey state timing loss" = the Year-1 state tax savings foregone because of New Jersey's 100% add-back. Deductions recover over the property's normal MACRS depreciation life on the state return — this is a timing hit, not a permanent loss. The federal deduction is unaffected.
New Jersey does not conform federal §168(k) bonus depreciation. New Jersey has decoupled from §168(k) since P.L. 2002 c.40. For Gross Income Tax (GIT) — the tax individual STR investors pay — federal bonus depreciation is disallowed and depreciation is recomputed under IRC as of the applicable statutory date. Reported on Form GIT-DEP. On a $150,000 federal bonus deduction, a NJ STR investor at the 10.75% top rate loses ~$16,125 in Year-1 state savings. NJ's high rate + full decoupling = one of the largest state timing hits nationally.
On a $150,000 federal §168(k) bonus depreciation deduction, a New Jersey STR investor at the 10.75% top marginal rate loses $16,125 in Year-1 state tax savings due to the 100% add-back. The federal savings of about $48,000-$55,500 (at 32%-37% brackets) are unaffected and remain the dominant portion of the Year-1 tax benefit.
Yes — federal §168(k) 100% bonus depreciation remains the largest single Year-1 tax benefit for STR investors, and it is unaffected by New Jersey's state-level decoupling. The federal deduction still offsets W-2 income when the §469(c)(2) STR loophole applies (average guest stays ≤ 7 days + material participation). The New Jersey add-back is a deferral, not a permanent loss — deductions recover over the property's normal MACRS life on the state return.