Definitive 2026 breakdown of New York'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 York state timing loss |
|---|---|---|---|---|
| Small STR — $50,000 federal deduction | $50,000 | $16,000 | $18,500 | $5,450 |
| Typical STR — $150,000 federal deduction | $150,000 | $48,000 | $55,500 | $16,350 |
| Luxury/multi-property — $300,000 federal deduction | $300,000 | $96,000 | $111,000 | $32,700 |
"New York state timing loss" = the Year-1 state tax savings foregone because of New York'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 York does not conform federal §168(k) bonus depreciation. New York has decoupled from §168(k) since 2003 for both individual and corporate purposes, with narrow exceptions for Resurgence Zone and Liberty Zone property. Individuals report add-back on Form IT-225 using code A-209 and take state depreciation on Form IT-398. On a $150,000 federal bonus deduction, a NY STR investor at 10.9% top rate loses ~$16,350 in Year-1 state savings. NYC adds another 3.876% top rate (via NYC-1127 / IT-201 city tax) — total effective loss ~$22,164 in NYC. The 2026-2027 NY budget also decoupled from OBBBA's §168(n) qualified production property provisions.
On a $150,000 federal §168(k) bonus depreciation deduction, a New York STR investor at the 10.9% top marginal rate loses $16,350 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 York'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 York add-back is a deferral, not a permanent loss — deductions recover over the property's normal MACRS life on the state return.