What OBBBA Actually Did

Under the Tax Cuts and Jobs Act, 100% bonus depreciation started phasing down after 2022. It dropped to 80% in 2023, 60% in 2024, and was headed to 40% in 2025. OBBBA reversed that entirely. The law restored 100% first-year bonus depreciation under IRC Section 168(k) for qualified property placed in service after December 31, 2022, effectively wiping out the phase-down that had been eating into deductions for the last few years.

If you bought a $200,000 piece of equipment in 2024 and only claimed 60% bonus depreciation on your federal return, you can now amend and take the full $200,000. Going forward into 2026, any qualifying asset gets written off entirely in year one on your federal return.

New York’s Decoupling Problem

Here is where it gets expensive for New York businesses. New York State decoupled from federal bonus depreciation back in 2003 and has never reconnected. That means every dollar of bonus depreciation you claim on your federal return must be added back on your New York State return.

The state does give you something in exchange: a depreciation deduction spread over the asset’s normal useful life under the MACRS tables from IRS Publication 946. So you’ll eventually get the full deduction at the state level — just not all at once. On a five-year asset, you’re getting 20% per year for New York instead of 100% in year one.

For a business that just dropped $500,000 on new equipment, this creates a real cash flow gap. Your federal tax bill drops sharply, but your New York State tax bill barely moves. And if you’re planning your quarterly estimates based on the federal number, you’ll underpay the state and owe penalties in April.

The Math on a Real Purchase

Say you buy $300,000 in qualified equipment during 2026 with a 5-year MACRS life.

• Federal: $300,000 deduction in year one (100% bonus depreciation)
• New York State: $60,000 deduction in year one (regular MACRS, no bonus), with the remaining $240,000 spread over years two through five
• Difference: $240,000 of income that’s taxable in New York but not federally in 2026

At New York’s top corporate tax rate of 7.25%, that $240,000 timing difference costs about $17,400 in additional state tax in the first year compared to what you’d owe if the state conformed. You get it back over time, but the up-front hit is real. For a look at how this plays out in a no-add-back state, see our Miami bonus depreciation guide.

Section 179 Still Works in New York

Unlike bonus depreciation, New York does conform to the federal Section 179 expensing election under IRC Section 179. For 2026, the federal Section 179 limit is expected to exceed $1.2 million, though the New York deduction is capped at $250,000. So if your equipment purchase is $250,000 or less, you may be able to expense the full amount at both the federal and state level by electing 179 instead of bonus depreciation.

This is where planning matters. A blanket approach of claiming bonus depreciation on everything might save the most federal tax, but it can create a state-level mess. Sometimes splitting between 179 and bonus — or choosing 179 for certain assets and bonus for others — produces a better combined result. Your entity structure also affects how these deductions flow through.

NYC Business Taxes and Bonus Depreciation

New York City’s corporate tax (the Business Corporation Tax and the Unincorporated Business Tax) follows the state’s decoupling. If you operate in the five boroughs, you’re adding back bonus depreciation on your city return too. That’s a second layer of timing difference on top of the state add-back.

The city’s top corporate rate is 8.85%. Combined with the state rate, a large equipment purchase can generate a meaningful tax bill in the current year even though the federal write-off made the income disappear on your 1040 or 1120-S. This catches people off guard, especially S-corp owners who see a big federal loss and forget the state and city don’t share it. See how Los Angeles handles this same issue with California’s parallel decoupling.

What New York Businesses Should Do Now

If you’re buying equipment or vehicles in 2026, run the numbers at all three levels — federal, state, and city — before you commit to a depreciation strategy. The federal savings from 100% bonus depreciation are real. But the state and city timing differences can create a cash crunch if you’re not prepared.

Talk to your CPA before year-end. Estimated payments for New York need to reflect the add-back, and if you wait until filing season to sort it out, you’ll owe underpayment penalties on top of the tax itself.

Sources & References

• 26 U.S.C. § 168(k) — Special Allowance for Certain Property (Bonus Depreciation)
• NY Department of Taxation — New York Additions (Decoupling from Bonus Depreciation)
• IRS Publication 946 — How to Depreciate Property
• 26 U.S.C. § 179 — Election to Expense Certain Depreciable Business Assets
• IRS — Section 179 Deduction
• NYC Department of Finance — Business Corporation Tax