Highbridge StudiesNew York and New Jersey
Bonus depreciation in New York and New Jersey
New York State, New York City and New Jersey do not allow federal bonus depreciation. A cost segregation study still speeds up depreciation on the state return, just over several years instead of all in the first year.
The short answer
- New York State: no bonus depreciation.
- New York City: no bonus depreciation.
- New Jersey: no bonus depreciation.
- Does a study still help on the state return? Generally yes. The parts it finds still get their shorter 5, 7 or 15 year lives, so they are written off years sooner than the structure.
- Separate study for the state? No. One study serves the federal and state returns.
The federal rule
A cost segregation study finds the parts of a building with shorter lives: 5 or 7 years for items such as appliances, carpet and dedicated wiring, and 15 years for paving, site lighting, fencing and landscaping. The structure stays on 27.5 years for residential rentals or 39 years for other buildings.
On the federal return, bonus depreciation lets those shorter life parts be written off in full in the first year. A federal law signed in July 2025 made that permanent for property acquired and placed in service after January 19, 2025. The cost segregation calculator gives a rough federal estimate.
The state returns are different.
New York State
- New York does not allow federal bonus depreciation for property placed in service after May 31, 2003.
- Instead, depreciation is figured the way it was before bonus depreciation existed: over each part’s regular class life.
- Individuals, partnerships, estates and trusts show the difference on Form IT-398 and carry it to Form IT-225. Corporations use Form CT-399.
- A narrow exception covers certain property in part of lower Manhattan, from the rebuilding after September 11, 2001.
- New York also does not follow the separate first-year deduction the 2025 law created for qualified production property, such as factory buildings.
New York City
- For individuals who live in the city, the city income tax is figured from the New York State return, so the state adjustment carries through.
- The city’s business taxes follow the same rule as the state: no federal bonus depreciation, with the difference shown on Form NYC-399Z.
New Jersey
- New Jersey stopped allowing federal bonus depreciation for the Corporation Business Tax in 2002 and for the Gross Income Tax in 2004.
- Depreciation uses the same method and life as the federal return, just without the first-year write-off.
- For the Gross Income Tax, the difference is worked out on Form GIT-DEP.
- New Jersey also caps the separate section 179 deduction at a much lower amount than the federal limit.
What this means for a study
The study itself does not change. It assigns a cost and a depreciation class to each asset, and that one schedule serves the federal return and the state returns alike.
What changes is the timing on the state side. New York and New Jersey still use the shorter 5, 7 and 15 year lives. So the parts a study identifies are generally written off years sooner than the structure on the state return too. They are simply spread over their lives instead of taken all in the first year.
The result is two sets of depreciation for each asset, one federal and one state. Your accountant keeps both. When the building is sold, the state gain or loss differs from the federal one because different amounts were deducted along the way, and both states have forms for that adjustment. Depreciation recapture on the sale is a separate question.
For your accountant
A cost segregation study assigns a cost and a depreciation class to each asset. How those figures are used, including bonus depreciation, state treatment and the effect on tax, is for your accountant to decide. The page for accountants describes the fixed-asset schedule that comes with every report, and is cost segregation legal covers how the IRS reviews a study.
State rules change. This page reflects New York and New Jersey guidance as published for the 2025 tax year.
Sources
- New York Form IT-398, depreciation schedule for bonus depreciation property
- New York Form CT-399 instructions, for corporations
- New York Notice N-26-1, on the 2025 federal changes
- New York Form IT-201 instructions, for how city income tax follows the state return
- New York City Form NYC-399Z
- New Jersey Division of Taxation, New Jersey decoupled from federal depreciation
- New Jersey Form GIT-DEP
- IRS Publication 946, How to Depreciate Property, for the federal rule and class lives
- Public Law 119-21, the federal tax law signed in July 2025
Questions
Does New York follow federal bonus depreciation?
No. New York State has not allowed federal bonus depreciation for property placed in service after May 31, 2003, and New York City follows the same rule for its business taxes. Depreciation is figured instead over the regular class lives, on Form IT-398 for individuals, partnerships and trusts and on Form CT-399 for corporations.
Does New Jersey follow federal bonus depreciation?
No. New Jersey stopped allowing it for the Corporation Business Tax in 2002 and for the Gross Income Tax in 2004. Depreciation uses the same method and life as the federal return, without the first-year write-off. Individuals work out the difference on Form GIT-DEP.
Do I need a separate study for the state return?
No. The same study serves both. It assigns a cost and a class to each asset, and your accountant figures the federal and the state depreciation from that one schedule.
Does a study still help on a New York or New Jersey return?
Generally, yes, just more slowly. Both states still use the shorter 5, 7 and 15 year lives, so the parts a study identifies are written off years sooner than the structure. They are simply not written off all in the first year.