New York does not always follow the same depreciation rules used on your federal return. If you claimed depreciation deductions on business or investment property, you may need to complete Form IT-398 or Form IT-399 to calculate the required New York adjustment.
Pathway to this entry is:
New York State Return > Additions to Income > Other Additions > Depreciation Additions (IT-398 or IT-399)
What Are Forms IT-398 and IT-399?
New York requires taxpayers to make adjustments when federal depreciation differs from the depreciation allowed for New York tax purposes.
The adjustment is reported on one of the following forms:
- Form IT-398 - New York State Depreciation Schedule for IRC Section 168(k) Property.
- Form IT-399 - New York State Depreciation Schedule for Other Property.
These forms calculate the difference between the depreciation allowed on the federal return and the depreciation allowed by New York.
Which Form Should I Select?
Select Form IT-398 if:
The adjustment relates to property affected by federal bonus depreciation under IRC Section 168(k).
Common examples include:
- Equipment purchased for a business.
- Machinery.
- Computers and technology equipment.
- Business vehicles.
- Other property for which bonus depreciation was claimed federally.
Generally, if the property generated a New York bonus depreciation adjustment in a prior year, Form IT-398 is typically used.
For more information on this form, please see our article here.
Select Form IT-399 if:
The adjustment relates to other New York depreciation differences not reported on Form IT-398.
Examples may include:
- Property using different New York depreciation methods.
- Property requiring a New York depreciation subtraction.
- Property previously reported on Form IT-399 in prior years.
For more information on this form, please see our article here.
How Do I Complete the Entry?
Step 1: Select the Form
From the Please Select Form you want to Complete dropdown, choose:
- IT-398, or
- IT-399
based on the type of property and adjustment being reported.
Step 2: Select the Part
Choose the applicable part of the form from the Please Select Part dropdown.
The appropriate part depends on whether you are reporting:
- An addition modification.
- A subtraction modification.
- A disposition adjustment.
- Another New York depreciation adjustment.
Refer to any prior-year IT-398 or IT-399 schedules when making this selection.
Step 3: Enter a Description of the Property
Provide a brief description of the asset.
Examples:
- Delivery Truck
- Office Furniture
- Computer Equipment
- Manufacturing Machinery
- Rental Property Improvements
Use a description that clearly identifies the asset.
Step 4: Enter the Date of Disposition (If Applicable)
If the property was sold, exchanged, or otherwise disposed of during the tax year, enter the disposition date.
If the property was not disposed of during the year, leave this field blank unless otherwise required.
Step 5: Enter the Depreciation Method
Enter the depreciation method used for the property.
Examples may include:
- MACRS
- Straight Line
- ACRS
- Other applicable depreciation method
Step 6: Enter the New York Depreciation Deduction
Enter the amount of depreciation allowed for New York purposes.
This amount is generally determined from:
- Prior-year IT-398 or IT-399 schedules.
- New York depreciation worksheets.
- Business asset records.
Step 7: Enter the Federal/ACRS Depreciation Deduction
Enter the depreciation deduction claimed on the federal return for the same property.
This amount is often found on:
- Federal Form 4562.
- Schedule C.
- Schedule E.
- Partnership or S Corporation schedules.
- Business depreciation records.
How Does This Affect My Return?
These entries are used to calculate the difference between:
- Federal depreciation; and
- New York depreciation.
Depending on the calculation, the adjustment may:
- Increase New York taxable income.
- Decrease New York taxable income.
- Create an addition modification.
- Create a subtraction modification.
What Documentation Should I Keep?
Keep copies of:
- Federal Form 4562.
- Prior-year Forms IT-398 and IT-399.
- Depreciation schedules.
- Asset purchase records.
- Asset disposition records.
- Business tax returns and supporting schedules.
Important Information
- Most taxpayers will not need Forms IT-398 or IT-399.
- These forms are generally required only when New York depreciation differs from federal depreciation.
- Property that generated a New York depreciation adjustment in prior years will often require continued reporting until the asset is fully depreciated or disposed of.
- Use the same form that was used for the asset in prior years whenever applicable.
- Keep all supporting depreciation records with your tax records.
Additional Information
If you are unsure whether to use Form IT-398 or IT-399, review your prior-year New York depreciation schedules and Federal Form 4562. The form used in previous years for the asset will often indicate which depreciation schedule should continue to be used.