State and Local Tax Rules for Rental Owners: Bonus Add-Backs, Nonresident Returns, PTET and Transfer Taxes

The verified state and city rules Seayora applies to your rentals — New York, New Jersey, California, Pennsylvania, Connecticut, Massachusetts, Illinois, Florida, Texas, New York City and Philadelphia — each linked to the statute or agency page it was read from.

The federal plan is only half of what an owner pays. Where you live and where your buildings are decide four more things — whether the state follows federal bonus depreciation, whether you file a nonresident return, whether an LLC can elect a pass-through entity tax, and what a sale costs in transfer tax — and New York City and Philadelphia add their own taxes.

Seayora reads where you live from "State you live in" (and "City you live in") in your facts, and where each building is from its address — the city from the ZIP code’s county, so a ZIP that crosses the line says so instead of guessing. Every rule below was read from the state’s or city’s own statute or agency page on 2026-11-04. A rule Seayora has not verified is not stated: the plan says "not yet verified" and links the state’s tax agency.

Verified states: New York, New Jersey, California, Illinois, Massachusetts, Connecticut, Pennsylvania, Florida, Texas; cities: New York City and Philadelphia. Anywhere else the plan says the state is not yet in the verified set.

What is computed

The bonus depreciation add-back for New York, California and Illinois — your federal depreciation less the depreciation without bonus, from the same register. California also treats qualified improvement property as building. It is an estimate; the state’s own form is the return.
New Jersey: the federal bonus on property New Jersey taxes, with the adjustment left to Worksheet GIT-DEP.
On a sale recorded this year: the New York State transfer tax at the base rate, Pennsylvania’s 1%, Connecticut’s conveyance tax (state plus the base town rate), Massachusetts’ deeds excise, California’s county documentary transfer tax and Florida’s documentary stamp tax — each labeled an estimate with what it leaves out.

New York

New York does not follow federal bonus depreciation. No depreciation is recorded for these properties yet, so there is nothing to add back.

With the exception of resurgence zone and New York Liberty Zone property, New York does not follow the federal depreciation rules for IRC §168(k) property placed in service on or after June 1, 2003.
Add back the federal bonus depreciation (Form IT-225, A-209) and subtract the New York depreciation instead (S-213), both worked out on Form IT-398. A sale needs the disposition adjustment (S-214).
A partner or shareholder enters the amounts the partnership or S corporation reports instead of completing Form IT-398.
You live in New York, so every rental counts.

The law: N.Y. Tax Law §612; Instructions for Form IT-225 (A-209, S-213, S-214); Form IT-398. Instructions for Form IT-225 (A-209, S-213, S-214), N.Y. Tax Law § 612

New York’s pass-through entity tax (PTET). A partnership or New York S corporation — including an LLC taxed as one — can elect each year to pay New York tax at the entity level. The members get a credit, and the entity’s payment is not limited by the federal SALT cap.

The election is made every year; it does not carry forward.
A New York City partnership or city-resident S corporation that elects the state PTET can also elect the NYC PTET (Article 24-B).
A trust can claim the credit on its own return but cannot pass it to its beneficiaries.

The law: N.Y. Tax Law Art. 24-A (§860 et seq.); Art. 24-B. N.Y. Tax Law § 860 (Article 24-A), Pass-through entity tax (PTET), New York City pass-through entity tax

New York real estate transfer tax on a sale. A sale of New York real property pays the state transfer tax: $2 for each $500 of consideration.

The base rate is $2 for each $500 or fractional part of the consideration.
In New York City an additional $1.25 for each $500 applies when residential property sells for $3 million or more, or other property for $2 million or more.
The buyer of residential property for $1 million or more pays an additional 1% (§1402-a); in New York City the buyer of residential property for $2 million or more also pays a supplemental tax from 0.25% to 2.9% (§1402-b).

The law: N.Y. Tax Law §1402, §1402-a, §1402-b. N.Y. Tax Law § 1402, N.Y. Tax Law § 1402-a, N.Y. Tax Law § 1402-b

You file a New York nonresident return for these rentals. Income from owning real property in New York is New York-source income, so a nonresident owner files Form IT-203 and pays New York tax on it.

The same applies to a gain on selling the building, and — with conditions — to selling an interest in an entity whose assets are mostly New York real property.

The law: N.Y. Tax Law §631(b)(1)(A). N.Y. Tax Law § 631

New Jersey

New Jersey adjusts federal bonus depreciation. New Jersey and federal depreciation limits are different: a New Jersey adjustment is required when federal bonus depreciation or a §179 expense was deducted.

The adjustment applies to assets placed in service on or after January 1, 2004, and is computed on Worksheet GIT-DEP — for rental income on Schedule NJ-BUS-1, Part IV.
Seayora does not compute the New Jersey figure: the worksheet is the return.

The law: NJ-1040 Instructions, Schedule NJ-BUS-1 Part IV and Worksheet GIT-DEP. NJ-1040 Instructions (Worksheet GIT-DEP)

New Jersey’s Pass-Through Business Alternative Income Tax (BAIT). A partnership, S corporation or LLC taxed as one, with at least one member who is an individual, estate or trust paying New Jersey gross income tax, can elect to pay BAIT at the entity level.

The election is annual and must be made before any payment is accepted; for a calendar-year entity it is due March 15.
A single-member LLC or sole proprietorship is not eligible.

The law: New Jersey Division of Taxation, Pass-Through Business Alternative Income Tax. Pass-Through Business Alternative Income Tax (BAIT)

New Jersey realty transfer fee on a sale. The seller pays the realty transfer fee to record the deed, at graduated rates per $500. On transfers over $1 million of residential, commercial (other than industrial or apartment) and co-op property, the seller also pays the Graduated Percent Fee — since July 10, 2025, 1% up to $2 million, rising to 3.5% of the whole consideration above $3.5 million.

Before July 10, 2025 the over-$1 million fee was the buyer’s; P.L. 2025, c. 69 moved it to the seller and added the higher brackets.

The law: N.J.S.A. 46:15-7; N.J.S.A. 46:15-7.2 as amended by P.L. 2025, c. 69. Realty Transfer Fee, N.J.S.A. 46:15-7 (unofficial copy), Graduated Percent Fee memorandum (P.L. 2025, c. 69)

New Jersey: Nonresident filing for New Jersey rentals — Seayora has not yet verified New Jersey’s rule on nonresident filing for new jersey rentals from the state’s own text, so it is not stated here — check with New Jersey Division of Taxation or your preparer. New Jersey Division of Taxation

California

California does not follow federal bonus depreciation. No depreciation is recorded for these properties yet, so there is nothing to add back.

California does not allow the additional depreciation of IRC §168(k); the difference is reported on Form FTB 3885A.
California also does not apply qualified improvement property (IRC §168(e)(6)), so an interior improvement is depreciated as building — the estimate does the same.

The law: Cal. Rev. & Tax. Code §17250(a)(7); Instructions for Form FTB 3885A. Cal. Rev. & Tax. Code § 17250, Instructions for Form FTB 3885A

California’s pass-through entity elective tax. An entity taxed as a partnership or S corporation can elect each year to pay a 9.3% elective tax on its qualified members’ income; they claim a credit. The Franchise Tax Board lists the years 2022 through 2030.

The election is irrevocable and is made on a timely filed original return — never on an amended one.
Publicly traded partnerships cannot elect.

The law: Cal. Rev. & Tax. Code §19900 et seq. Cal. Rev. & Tax. Code § 19900, Pass-through entity elective tax

California documentary transfer tax on a sale. A county may impose a documentary transfer tax of $0.55 for each $500 of consideration, and a city within it half that, credited against the county tax.

The law: Cal. Rev. & Tax. Code §11911. Cal. Rev. & Tax. Code § 11911

You file a California nonresident return for these rentals. A nonresident is taxed on gross income from sources within California — rent from property located there is California-source. File Form 540NR.

The law: Cal. Rev. & Tax. Code §17951. Cal. Rev. & Tax. Code § 17951

Illinois

Illinois adds back federal bonus depreciation. No depreciation is recorded for these properties yet, so there is nothing to add back.

An individual adds back the federal bonus depreciation and then subtracts, that year and later, the depreciation the property would have had without it.
When the property is sold, the remaining difference is adjusted in that year.

The law: 35 ILCS 5/203(a)(2)(D-15), (Z), (AA). 35 ILCS 5/203

Illinois: Pass-through entity tax — Seayora has not yet verified Illinois’s rule on pass-through entity tax from the state’s own text, so it is not stated here — check with Illinois Department of Revenue or your preparer. Illinois Department of Revenue

Massachusetts

Massachusetts’ elective pass-through entity excises. A partnership, S corporation or trust can elect the chapter 63D excise (5% of members’ income taxed in Massachusetts) and, from 2026, the chapter 63E excise (4% of income above the surtax threshold). Members get a credit of 90% of their share.

Both excises expire if the federal SALT deduction limitation expires or is repealed.
A disregarded single-member LLC cannot elect. From 2026 the election is made on Form 63-ELT.

The law: M.G.L. c. 63D; c. 63E (St. 2026, c. 101). Elective pass-through entity excise

Massachusetts deeds excise on a sale. The person signing the deed pays $2 for each $500 of consideration plus a 14% surtax — $2.28 per $500 in most counties; Barnstable County’s rate is lower.

The law: M.G.L. c. 64D, §1; DOR Directive 89-14. M.G.L. c. 64D, § 1, DOR Directive 89-14

Massachusetts: Bonus depreciation for personal income tax — Seayora has not yet verified Massachusetts’s rule on bonus depreciation for personal income tax from the state’s own text, so it is not stated here — check with Massachusetts Department of Revenue or your preparer. Massachusetts Department of Revenue

Connecticut

Connecticut’s pass-through entity tax. A partnership or S corporation can file Form CT-PET to pay Connecticut’s pass-through entity tax at the entity level; its members claim a credit.

The law: Instructions for Form CT-1065/CT-1120SI (Form CT-PET). Form CT-1065/CT-1120SI Instructions (Form CT-PET)

Connecticut real estate conveyance tax on a sale. The seller pays the conveyance tax: a state portion (residential 0.75% up to $800,000, 1.25% to $2.5 million and 2.25% above; other property 1.25%) plus the town’s portion, 0.25% in most towns.

A resident who paid the 2.25% rate on a residence may be able to claim part of it as a credit against Connecticut income tax (Schedule CT-1040 REC).

The law: Conn. Gen. Stat. §12-494; Schedule CT-1040 REC. Conn. Gen. Stat. § 12-494 (Chapter 223), Schedule CT-1040 REC (the 2.25% rate)

Connecticut: Bonus depreciation for personal income tax — Seayora has not yet verified Connecticut’s rule on bonus depreciation for personal income tax from the state’s own text, so it is not stated here — check with Connecticut Department of Revenue Services or your preparer. Connecticut Department of Revenue Services

Pennsylvania

Pennsylvania realty transfer tax on a sale. Pennsylvania imposes 1% on the value of real estate transferred, collected with the local realty transfer tax by the county Recorder of Deeds. Buyer and seller are jointly and severally liable.

The law: Pennsylvania Department of Revenue, Realty Transfer Tax (Tax Reform Code Article XI-C). Realty Transfer Tax

Pennsylvania: Bonus depreciation for personal income tax — Seayora has not yet verified Pennsylvania’s rule on bonus depreciation for personal income tax from the state’s own text, so it is not stated here — check with Pennsylvania Department of Revenue or your preparer. Pennsylvania Department of Revenue

Pennsylvania: Pass-through entity tax — Seayora has not yet verified Pennsylvania’s rule on pass-through entity tax from the state’s own text, so it is not stated here — check with Pennsylvania Department of Revenue or your preparer. Pennsylvania Department of Revenue

Florida

Florida has no personal income tax on your rentals. Florida does not tax an individual’s income, so rent from a Florida property owned by a person adds no state income tax there. A state you live in may still tax it.

The law: Florida Department of Revenue. Florida Department of Revenue

Florida documentary stamp tax on a deed. A deed conveying Florida real property pays documentary stamp tax of 70 cents on each $100 of consideration.

The law: Fla. Stat. §201.02(1)(a). Fla. Stat. § 201.02

Texas

Texas has no personal income tax on your rentals. Texas does not tax an individual’s income, so rent from a Texas property owned by a person adds no state income tax there. A state you live in may still tax it.

The law: Texas Comptroller of Public Accounts. Texas Comptroller of Public Accounts

A Texas LLC or partnership that rents property may owe franchise tax. A partnership or trust can be a passive entity, exempt from the franchise tax — but rental income is not passive income for that test, so an entity whose income is mostly rent generally does not qualify.

The law: Tex. Tax Code §171.0003; Texas Comptroller franchise tax FAQ. Franchise tax: passive entities

New York City

Holding and renting your own buildings is not subject to the NYC UBT. An owner, lessee or fiduciary is not engaged in an unincorporated business solely by holding, leasing or managing real property. Even an owner who runs another business in the city is not taxed on rent or gain from property held to produce rental income.

A dealer holding property for sale to customers does not get the exclusion.
A garage or parking lot open to the public at the property is treated differently.

The law: NYC Admin. Code §11-502(d). NYC Admin. Code § 11-502, Unincorporated Business Tax (UBT)

New York City real property transfer tax on a sale. On top of the state tax: a one-to-three family house, condo unit or co-op apartment pays 1% up to $500,000 and 1.425% above; every other transfer — an apartment building or a commercial building — pays 1.425% up to $500,000 and 2.625% above.

It also applies to selling 50% or more of an entity that owns the property.
A qualifying transfer to a REIT pays half the rate.

The law: NYC Admin. Code Title 11, Chapter 21. NYC Real Property Transfer Tax

Philadelphia

Philadelphia’s Business Income & Receipts Tax applies to rentals. Anyone engaged in commercial or residential real estate rental activity in Philadelphia files a BIRT return — on gross receipts and on net income — whether or not it made a profit. The first $100,000 of gross receipts is exempt, with a proportionate share of net income.

A business with $100,000 or less of Philadelphia taxable gross receipts files the one-page No Tax Liability form instead.

The law: City of Philadelphia, Business Income & Receipts Tax. Business Income & Receipts Tax (BIRT)

Philadelphia’s Net Profits Tax. The rental of property is, in most cases, the operation of a business. A Philadelphia resident owes Net Profits Tax on net profits wherever earned; a nonresident on business conducted in Philadelphia. For 2025: 3.74% (resident), 3.43% (nonresident).

A credit may be taken based on the BIRT net income portion paid.
Corporations are exempt.

The law: City of Philadelphia, Net Profits Tax. Net Profits Tax

Philadelphia realty transfer tax on a sale. A sale of Philadelphia real estate pays the City’s rate plus the Commonwealth’s 1% — 4.578% in total on the City’s page — usually split between buyer and seller, though the City may collect all of it from either.

The law: City of Philadelphia, Realty Transfer Tax. Philadelphia Realty Transfer Tax

What is not covered

State income tax itself is not computed — only the rules above and the estimates they carry. A trust’s or a REIT’s state filings are not computed. Local taxes other than New York City’s and Philadelphia’s are not covered. Your preparer will know the rest.

Related guides

Related features and guides

Tax Planning for Owners, Trusts and REITs: Lower the Tax on Your Rentals — Documentation. Every lawful way to lower the federal tax on your rentals, measured against your own records — plus tax depreciation and cost segregation, trusts’ Form 1041 and distributions, REIT qualification tests, and the state and city rules where you live and own.
Tax Depreciation and Cost Segregation for Rental Property — Documentation. How Seayora depreciates each kind of rental property — 27.5 and 39 years, 5, 7 and 15 years — bonus depreciation by purchase date, catching up missed depreciation on Form 3115, and what a sale recaptures.
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