New York Changes How Businesses Count Their Depreciation and R&D Costs

The New York State Department of Taxation and Finance has released new rules that alter how companies calculate their taxable income for the year 2025. The changes mean that New York no longer follows the federal rules that let businesses take faster depreciation on certain equipment or treat research and experimental expenses in a special way. Instead, New York now requires its own set of adjustments that taxpayers must apply when filing state returns. Because the new rules differ from the federal approach, businesses will need to add or subtract amounts when they compute their New York taxable income. These adjustments affect a wide range of entities, including individuals who own small businesses, partnerships that share profits, corporations that issue stock, and shareholders in S corporations. The notice provides step‑by‑step guidance on how each type of taxpayer should report their figures so that they comply with the new state requirements.The shift away from federal accelerated depreciation means that companies can no longer claim the larger deductions they previously could for certain production property. This change will likely increase the amount of income that is subject to state tax. At the same time, the new treatment of research and experimental costs will change how businesses can offset their expenses against revenue in New York. Taxpayers who rely heavily on R&D may find that they owe more state tax than before. Businesses should review the notice carefully and adjust their accounting systems accordingly. The goal is to avoid mistakes that could trigger penalties or additional audits. Consulting a tax professional who understands both federal and state rules can help ensure that all required additions and subtractions are made correctly. In short, New York is tightening its tax rules for 2025 by moving away from certain federal provisions. Companies that are used to taking advantage of accelerated depreciation or special R&E treatment will need to adapt their filing practices and may face higher taxable income in the state.