Every December the same file lands on a preparer’s desk. A client bought a heavy SUV or a piece of equipment before year end, the federal deduction is large, and the federal arithmetic is right. Then the New York or New Jersey return is prepared as if the state followed federal.
Neither state does, and they leave in opposite directions. New York starts from federal adjusted gross income and bolts on modifications, and one of those modifications is permanent. New Jersey ignores the federal number altogether, keeps its own basis for the asset, and settles up when the asset is sold. The same purchase can produce three different year-one deductions on three returns.
Start with the acquisition date, not the invoice
The 100 percent bonus rate reaches only property acquired and placed in service after Jan. 19, 2025. Property acquired after Sept. 27, 2017, and before Jan. 20, 2025, stays under the old phase-down, and for property placed in service in 2026 that rate is 20 percent (Rev. Proc. 2026-15). A vehicle ordered in 2024 and delivered in 2026 is a 20 percent vehicle. Ask the client for the order date, not just the delivery date.
For 2026 the Section 179 limit is $2,560,000, with the phase-out starting at $4,090,000, and the cap for a heavy sport utility vehicle is $32,000 (Rev. Proc. 2025-32).
Section 179(b)(5) defines that SUV as a four-wheeled passenger vehicle “which is not subject to section 280F” and rated at no more than 14,000 pounds. So the SUV cap and the luxury-automobile caps are mutually exclusive. A passenger-bodied vehicle rated above 6,000 pounds takes the $32,000 cap and no Section 280F cap at all. A lighter vehicle takes the Section 280F caps and never the SUV cap. The number that decides it is the gross vehicle weight rating on the driver’s door-jamb label, not the curb weight in the brochure.
New York: Bonus comes back, Section 179 does not
New York conforms to federal AGI on a rolling basis and then decouples by specific paragraph. Two paragraphs of tax law Section 612 matter here, and they behave very differently.
Bonus is a timing difference: Section 612(b)(8) adds back the federal deduction on Section 168(k) qualified property placed in service on or after June 1, 2003, regardless of the asset’s weight. Section 612(k) then allows depreciation “as such section would have applied to such property had it been acquired by the taxpayer on September tenth, two thousand one,” which is to say ordinary MACRS under pre-bonus law. Section 612(l) adjusts the gain or loss when the asset is sold. On Form IT-225 that is modification A-209 to add back, S-213 to substitute, and S-214 at disposition, with the computation on Form IT-398.
The client gets the deduction back over the recovery period and the basis is corrected at sale. A preparer who elects out of bonus federally finds that the addback and the substitute are the same number.
Section 179 on a heavy SUV is not: Section 612(b)(36) adds back “the amount of any deduction claimed pursuant to section 179 of the Internal Revenue Code with respect to a sport utility vehicle which is not a passenger automobile as defined in paragraph 5 of subsection (d) of section 280F,” unless the taxpayer is an eligible farmer. That is the same weight finding that won the federal deduction, now read with the opposite sign. The only subtraction tied to it, Section 612(c)(37), allows a deduction solely for amounts “required to be recaptured pursuant to subsection (d) of section 179.” On Form IT-225 the pair is A-208 and S-212, and S-212 is titled recapture.
There is no substitute depreciation code and no disposition adjustment. Federal basis is reduced to near zero, New York starts from the federal gain at sale, and nothing corrects it. The deduction is lost to New York for good.
New York also writes its own definition. The IT-225 instructions define a sport utility vehicle as “any four-wheeled passenger vehicle manufactured primarily for use on public streets, roads, and highways,” and exclude ambulances and hearses, vehicles used for hire, and “any truck, van, or motor home.” There is no bed-length test and no cross-reference to the federal exclusions. A crew-cab pickup with a bed under six feet is capped as an SUV federally and is a truck to New York. A heavy, passenger-bodied SUV is caught by both. A client betting a large election on a borderline body style deserves a disclosed position on the return or a New York Advisory Opinion request, not a guess.
The planning rule for a New York client with a heavy SUV follows directly: take bonus, not Section 179. Bonus recovers in full through the IT-398 cycle. Section 179 does not come back. And Section 179(c)(2) lets the taxpayer revoke the election without consent, so a prior-year election on a heavy SUV can still be fixed by amending.
New Jersey keeps its own books
New Jersey decoupled in 2004, when P.L. 2004, c.65 added Section 5-1.2 to the Gross Income Tax Act for assets placed in service on or after Jan. 1, 2004, and it has not recoupled since. The return instructions say almost nothing. Every operative rule lives in Worksheet GIT-DEP, revised October 2025.
The worksheet is blunt: “The maximum Section 179 deduction is $25,000.” That figure is not indexed. “There are no business income limitations. Unused deductions cannot be carried forward.” Nor can an unused adjustment be carried back or “applied against another category of income.” New Jersey does not follow the federal bonus allowance as it exists today, and the worksheet contains no vehicle rules at all. No SUV cap, no luxury cap, no listed-property provision. In New Jersey a heavy SUV is simply an asset.
What New Jersey takes away in year one, it returns at sale. The worksheet runs “until the asset is fully depreciated or disposed of,” with “adjustments to the gain or loss from disposition of the assets” in Part IV, flowing to Schedule NJ-DOP. Whatever New Jersey denied comes back as reduced gain. The $25,000 ceiling is a timing difference, never a loss.
The trap is procedural. The worksheet says that if the initial New Jersey adjustment “was not reported,” whether by a reporting error or because the taxpayer “did not have a New Jersey filing requirement,” then the asset’s New Jersey basis “will be the same as for federal tax purposes, and a New Jersey depreciation adjustment is neither required nor allowable in subsequent years.” One chance. Miss the first-year GIT-DEP and the asset is locked to federal basis for its whole life.
The lease is the only clean exit, and only if it is a lease
Section 179(d)(1)(C) limits the election to property “acquired by purchase for use in the active conduct of a trade or business.” A lessee buys nothing, so there is no Section 179, no bonus, and no depreciation. There is rent. Both state regimes hang off a deduction the lessee never claims: New York’s A-208 applies “if you claimed an IRC § 179 deduction,” and New Jersey’s worksheet applies only where the “Special Depreciation Allowance or Section 179 expense were deducted.” A true lease of a heavy SUV escapes both.
The federal side still has a toll on light vehicles. Section 280F(c)(2) limits the deduction for lease payments on listed property leased for 30 days or more to an “allowable percentage,” set so the reduction is “substantially equivalent” to the ownership caps. Those caps apply only to passenger automobiles, so a leased vehicle rated above 6,000 pounds carries no inclusion amount.
Substance controls. A lease with a nominal buyout, a term that runs the asset’s useful life, or equity building for the lessee is a purchase, and every rule above returns.
One asset, three answers
As an illustration, take an $80,000 passenger-bodied SUV rated above 6,000 pounds, used 100 percent for business, acquired and placed in service in the fourth quarter of 2026.
- Federal: $80,000 in year one, whether by 100 percent bonus or by $32,000 of Section 179 with bonus on the remaining $48,000.
- New York, bonus route: The $80,000 is added back on A-209, ordinary depreciation is substituted on S-213, and basis is trued up on S-214 at sale. Recovered.
- New York, Section 179 route: The $48,000 of bonus follows the same cycle. The $32,000 of Section 179 is added back on A-208 and never returns.
- New Jersey: At most $25,000 of Section 179 in year one, the balance on New Jersey’s own depreciation schedule, everything reconciled at sale through GIT-DEP Part IV, provided the first-year worksheet was filed.
A year-end checklist
- Get the order date and the in-service date. They decide 100 percent or 20 percent.
- Photograph the door-jamb label. The gross vehicle weight rating decides the federal caps and the New York addback.
- Classify the body style twice: SUV or truck under Section 179(b)(5), and SUV or truck under the IT-225 definition.
- For a New York client with a heavy SUV, model bonus against Section 179 with a New York column. The federal numbers will be identical and the state numbers will not.
- For a New Jersey client, prepare GIT-DEP in the year the asset goes into service, every time.
- For any client set on a heavy SUV, price a true lease against a purchase before the papers are signed.
A federal-only model will pick the Section 179 dial without ever seeing its state price tag. The same asset, placed in service the same week, is a timing difference in Trenton, a permanent loss in Albany, and a full deduction in Washington. The return that gets all three right starts with the acquisition date and the weight label, not with the invoice.
ABOUT THE AUTHOR:
Myung Keon Kim, CPA, is the owner of Myung Keon Kim CPA, a tax and accounting practice in New York serving small businesses and individuals in New York, New Jersey, and Connecticut, in English and Korean. Kim also holds the CPIM designation in planning and inventory management. Learn more at https://keonadvisory.com.
Photo credit: magnific/Freepik
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