IT-398: New York State Depreciation Schedule for IRC Section 168(k) Property (2024)
New York · NY DTF · Used for tax years 2024
Form IT-398 computes New York State adjustments for state and federal depreciation deductions on IRC section 168(k) property. It reports property details, depreciation deductions, and adjustments for the year you dispose of the property.
Who files this form
Use Form IT-398 to calculate New York State depreciation adjustments for IRC section 168(k) property placed in service inside or outside New York State after May 31, 2003. Resurgence zone property and New York liberty zone property described in IRC section 1400L(b)(2) are excluded.
- Complete Part 1 if you claimed federal ACRS depreciation for covered property.
- Complete Part 2 when you dispose of covered property to calculate the required New York income adjustment.
- Nonresidents and part-year residents must complete the form as if they were New York residents for the entire year.
- For a partnership using IRC section 168 to determine depreciation, only the partnership completes Form IT-398. Individual partners report their distributive shares of the adjustments on their personal income tax returns.
What you'll need
Have the following information available:
- Your name and identifying number, either your Social Security number or employer identification number, as shown on your return.
- Property descriptions, dates placed in service, and depreciable basis amounts.
- Federal Form 4562, column E, for the depreciation convention used.
- Your selected New York depreciation method, New York depreciation deduction, and depreciation deduction taken on your federal return.
- For property disposed of, the date and method of disposition and total New York and federal depreciation deductions claimed on that property.
- Form IT-212 information if you claimed an investment credit for property listed in Part 2.
Use an additional sheet for property descriptions if needed. If you filed a joint federal return but must file separate New York returns, submit a schedule with each return showing each spouse’s separate amounts and explaining any differences.
How to file
Enter your name and identifying number. Mark an X in one box to show which return you are filing: IT-201, IT-203, IT-204, or IT-205. Submit Form IT-398 with that return.
Transfer the calculated amounts to Form IT-225:
- Part 1, column F total: line 10, Total amount column, with subtraction modification S-213 in the Number column.
- Part 1, column G total: line 1, Total amount column, with addition modification A-209 in the Number column.
- Part 2, line 5: line 10, Total amount column, with subtraction modification S-214 in the Number column.
The supplied text does not provide a mailing address or e-file instructions.
Common mistakes
- Including property outside the form’s scope. Use this form only for property placed in service after May 31, 2003. The specified resurgence zone and New York liberty zone property are excluded.
- Depreciating land. The form states that land is never depreciable.
- Reducing passive-activity adjustments because of federal loss limits. The required federal and New York depreciation modifications must use the full allowable amounts, even if the activity is subject to federal loss deduction limitations.
- Missing investment credit reporting. Mark the Part 2 box if you claimed an investment credit on Form IT-212 for any property listed there.
- Overlooking credit repayment on an early disposition. If property with an investment, retail enterprise, or research and development credit taken on Form IT-212 is disposed of or removed from qualified use before its useful life or specified holding period ends, add the difference between the credit taken and the credit allowed for actual use to income tax for the disposition year. See Form IT-212 and its instructions.
Questions people ask
Why is New York depreciation different from federal depreciation?
For covered property, New York does not allow the federal special depreciation deduction under IRC section 168(k). Instead, it allows depreciation under IRC section 167 as that section would have applied if the property had been acquired on September 10, 2001.
How long can I take the New York depreciation deduction?
You may take it until the property is disposed of or fully depreciated.
What counts as disposing of property?
Disposition includes sale, exchange, transfer, and obsolescence, but is not limited to those events. Part 2 calculates the adjustment using total federal depreciation minus total New York depreciation claimed on the property.
What if we filed jointly federally but must file separate New York returns?
Complete only one Form IT-398 using the amounts from your joint federal return. Submit a schedule with each New York return showing each spouse’s amounts as if separate federal returns had been filed, and explain any differences.
Where does a New York S corporation shareholder get depreciation information?
If you are a shareholder of an electing New York State S corporation, the corporation should provide your proportionate share of its depreciation deduction.