Does New York Allow Section 179 Depreciation?

Yes, New York allows the federal Section 179 depreciation deduction on your state return, and it does so at the full federal amount rather than the reduced cap several other states impose. There is one narrow exception involving heavy sport utility vehicles. The bigger compliance issue for most New York businesses is not Section 179 at all but federal bonus depreciation under IRC Section 168(k), which New York disallows entirely and which is often confused with Section 179.

Why Section 179 Passes Through to Your New York Return

New York Tax Law Section 612 lists every modification the state requires when you convert federal adjusted gross income to New York adjusted gross income. That list does not include a general add-back of the federal Section 179 deduction.¹ If you expense $500,000 of qualifying equipment under Section 179 federally, that same $500,000 reduces your New York taxable income. No separate state depreciation schedule is needed for the Section 179 portion of the asset, and no modification code applies to a standard Section 179 election.

Section 179 itself lets you write off the full cost of qualifying equipment, off-the-shelf software, and certain nonresidential building improvements (roofs, HVAC, fire protection, security systems) in the year you place them in service. The deduction is capped at your taxable income from the active conduct of a trade or business, so you cannot use it to create or increase a loss.² Because New York accepts the federal election, that same income cap and the same qualifying-property rules control your state result.

The Heavy SUV Exception

New York carves out one exception under Section 612(b)(36). If you claim a Section 179 deduction on a sport utility vehicle that weighs more than 6,000 pounds and is not classified as a passenger automobile under IRC Section 280F(d)(5), you must add the entire federal Section 179 deduction back to your New York income.¹ The addition modification code is A-208, reported on Form IT-225.³

The definition of “sport utility vehicle” is narrow. It covers a four-wheeled passenger vehicle primarily manufactured for use on public roads. Trucks with an attached cargo area, vans, ambulances, hearses, and vehicles used directly to transport persons or property for hire are excluded, so Section 179 on those vehicles flows through to New York without any add-back. An eligible farmer, as defined for the farmers’ school tax credit, is also exempt from the SUV add-back.

If federal law later recaptures your Section 179 deduction on the SUV because business use drops to 50% or below, New York gives you a matching subtraction modification under Section 612(c)(37). You are not taxed twice on the same income.¹

The Bonus Depreciation Trap

Section 179 and federal bonus depreciation are two separate provisions, and it is worth being clear about which is which because New York treats them very differently. Bonus depreciation lives in IRC Section 168(k). Under the One Big Beautiful Bill Act, a permanent 100% first-year bonus depreciation deduction applies to qualifying property acquired after January 19, 2025.⁴

New York does not allow bonus depreciation. For tax years beginning after 2002, the state requires you to add back the entire federal depreciation on any 168(k) property placed in service after May 31, 2003. The only exceptions are qualified resurgence zone property and New York Liberty Zone property.⁵ The addition modification code is A-209, computed on Form IT-398.

The practical effect: a $300,000 machine you write off 100% federally through bonus depreciation still gets fully added back to your New York income in year one. You then recover that $300,000 over the asset’s useful life for state purposes. If someone tells you “New York doesn’t allow Section 179,” what they usually mean is that New York doesn’t allow bonus depreciation. The distinction matters, because Section 179 with an election is the cleaner path if you want your federal write-off to survive on the state return.

How New York Recomputes Depreciation

When New York disallows bonus depreciation, it substitutes the depreciation method described in IRC Section 167 as that section applied before the modern recovery systems took effect: a reasonable allowance for wear and tear over the asset’s actual useful life.⁶ Acceptable methods include straight-line, declining balance, or sum-of-the-years-digits. Useful lives follow the older guidelines rather than MACRS recovery periods. Office furniture with a seven-year MACRS life might carry a ten-year useful life for New York. For 168(k) property specifically, the state computes the deduction as if the property had been acquired on September 10, 2001.⁵

Because New York disallowed the immediate federal write-off, the full cost of the asset remains available for state depreciation. You recover the same total cost. Only the timing changes.

The Forms You File Each Year

Once federal and state depreciation diverge on an asset, you have annual work to do for as long as you own it. In the placed-in-service year, you make an addition modification to reverse the federal deduction. In each later year, you make a subtraction modification equal to the difference between New York depreciation and whatever federal depreciation remains.

Form IT-398 for Bonus Depreciation Property

Individuals, partnerships, and fiduciaries use Form IT-398 for property subject to federal 168(k) bonus depreciation. The form compares federal depreciation claimed against New York depreciation allowed and produces the net adjustment, which transfers to Form IT-225 as modification A-209.⁵

Form IT-399 for Older ACRS Property

Form IT-399 covers assets placed in service during the 1981–1984 period, plus property placed in service outside New York during 1985–1993 where the taxpayer elected Section 167 depreciation. Results flow to Form IT-225 using modification codes A-205, S-210, and S-211.⁷

Form CT-399 for Corporations

C corporations and S corporations subject to Article 9-A use Form CT-399 rather than the IT series. The mechanics are the same: compute the difference between federal and New York depreciation and adjust state taxable income accordingly.⁸

Skipping the annual subtraction modification permanently forfeits that year’s state depreciation benefit. New York will not let you sweep up missed prior-year deductions on a current return.

Partnerships and S Corporations

If depreciable assets sit inside a partnership or S corporation, the modifications flow through to your personal return based on your distributive share. You do not compute them yourself. The entity reports your share, and you carry the amount to Form IT-225.⁹

Nonresident partners have one more layer. The modification is limited to the portion of income derived from or connected with New York sources, and the partnership return must break out each nonresident partner’s New York-source share of the modification separately.¹⁰

Selling an Asset with Two Different Bases

When you sell property that has been depreciated differently for federal and state purposes, your New York basis is generally higher than your federal basis, so the gain reported to New York is generally lower than the federal gain. You reconcile the two on the disposition adjustment.

For 168(k) property, Part 2 of Form IT-398 handles the calculation: total New York depreciation claimed over the asset’s life against total federal depreciation, with the difference reported on Form IT-225.⁵ For ACRS property, the same reconciliation happens in Part 2 of Form IT-399, using modification codes A-206 or S-211.³ Missing this step is a common error. If you have been making subtraction modifications faithfully over the asset’s life, the disposition adjustment squares the ledger.

What Getting It Wrong Costs

An unreported addition modification understates your New York tax. If your reported tax is less than the correct amount by more than 10% or $2,000, whichever is greater, the penalty is 10% of the shortfall. If the underpayment is due to negligence, the penalty is 5% of the underpayment plus 50% of the interest owed. Interest itself compounds daily at rates the state adjusts quarterly.¹¹

The mirror image applies too. Forgetting the subtraction modification in later years means you overpay New York and leave money on the table. Neither mistake self-corrects. You need an amended return to fix either one.

1
New York State Senate. New York Tax Law 612 – New York Adjusted Gross Income of a Resident Individual
2
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
3
New York State Department of Taxation and Finance. Instructions for Form IT-225 New York State Modifications
4
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
5
New York State Department of Taxation and Finance. Form IT-398 New York State Depreciation Schedule for IRC Section 168(k) Property
6
Office of the Law Revision Counsel. 26 US Code 167 – Depreciation
7
New York State Department of Taxation and Finance. Form IT-399 New York Depreciation Schedule
8
New York State Department of Taxation and Finance. Form CT-399 Depreciation Adjustment Schedule
9
Legal Information Institute (LII) / Cornell Law School. 20 NYCRR 117.3 – Modification of Partnership Items in Partners New York State Personal Income Tax Return
10
Legal Information Institute (LII) / Cornell Law School. 20 NYCRR 137.3 – Modification of Partnership Items in Partners New York State Nonresident Personal Income Tax Return
11
New York State Department of Taxation and Finance. Interest and Penalties