Form IT-398: New York Depreciation Schedule for IRC Section 168(k) Property (Tax Year 2025)

Form IT-398 is the New York State Depreciation Schedule for IRC Section 168(k) Property, issued by the New York State Department of Taxation and Finance. It exists because New York does not follow the federal bonus depreciation rules found in Internal Revenue Code Section 168(k). When a taxpayer claims bonus depreciation on their federal return, New York requires an adjustment on the state return, and Form IT-398 is the tool used to calculate that adjustment year by year.

In plain terms: the federal government lets businesses and individuals write off a large percentage of the cost of certain property in the year it’s placed in service, rather than depreciating it slowly over its useful life. New York decoupled from this treatment years ago, so it requires taxpayers to add back the extra federal depreciation in the first year, then recover that amount gradually over the following years as a subtraction from income. Form IT-398 tracks that recovery.

Who Needs to File Form IT-398

You need this form if you claimed bonus depreciation under IRC Section 168(k) on qualifying property for federal tax purposes and you’re a New York State resident, part-year resident, nonresident, estate, trust, or business entity with New York tax obligations. This applies whether you’re filing an individual income tax return, a corporate return, or a return for a partnership or S corporation that passes depreciation adjustments through to its owners.

Common examples of property that trigger this requirement include machinery, equipment, computer systems, and certain improvements placed in service during the tax year that qualified for the federal 100% or partial bonus depreciation deduction. If none of your assets were eligible for federal bonus depreciation, you likely won’t need to touch this schedule at all.

When Form IT-398 Comes Into Play

You’ll typically use IT-398 in two situations. First, in the year you place bonus depreciation property in service, the form helps calculate how much depreciation you must add back to your New York income because the state doesn’t allow the accelerated federal deduction. Second, in subsequent tax years, the form calculates the subtraction you’re entitled to as you recover that add-back over time, following New York’s standard depreciation rules instead of the federal bonus method.

This makes IT-398 a recurring form for many taxpayers rather than a one-time filing. If you purchased qualifying equipment in 2022 and used bonus depreciation federally, you may still be completing this schedule in 2025 as part of the multi-year recovery period, even if you didn’t buy any new bonus-eligible property this year.

How to Get and Complete the Form

Form IT-398 is available directly from the New York State Department of Taxation and Finance website as a fillable PDF, which means you can type your entries directly into the form fields before printing or saving your copy for your records. The form asks for details about each piece of qualifying property, including its description, the date it was placed in service, the federal depreciation claimed, and the New York depreciation allowed under state rules. The difference between these two figures is what flows through to your main New York tax return as an addition or subtraction modification.

Because this schedule interacts with other parts of your New York filing, it’s worth reviewing it alongside your main return type. If you’re an individual taxpayer also dealing with other adjustments, you might find it helpful to look at related New York forms such as Form IT-272 for education-related credits, or if you need more time to gather your depreciation records before filing, Form IT-370 can give you a six-month extension. And for taxpayers dealing with joint filing complications separate from depreciation issues, Form IT-285 addresses innocent spouse relief situations.

Keep your completed IT-398 with your tax records even after filing, since you’ll likely need the same property information again in future years to continue the depreciation recovery calculation until the full adjustment has been accounted for.