When Congress changes federal tax law, states do not automatically follow. Each state has its own conformity mechanism - some states update automatically (rolling conformity), others are frozen at a fixed IRC date (static conformity), and some selectively adopt specific provisions through legislation. OBBBA P.L. 119-21 made sweeping changes to the IRC - restoring 100% bonus depreciation, permanently extending §199A, increasing estate tax exemptions, and dozens of other provisions. Which of those changes apply in your state depends entirely on your state's conformity posture. For multi-state businesses and high-income individuals, the state tax return can look dramatically different from the federal return.
Rolling conformity states: Automatically adopt IRC changes as they are enacted. Examples: New York, Illinois, Virginia. When OBBBA passed, these states generally adopted its provisions immediately - unless they had already enacted specific decoupling legislation.
Static conformity states: Conform to the IRC as of a specific fixed date. If that date predates OBBBA, the state does not recognize any OBBBA provisions until the legislature updates the conformity date. Examples: California conforms to IRC as of January 1, 2015 (with modifications). Florida conforms as of a specific date updated periodically.
Selective conformity states: Adopt specific provisions through legislation, regardless of the general conformity posture. A state may adopt some OBBBA provisions but not others.
OBBBA restored 100% federal bonus depreciation for qualified property placed in service after January 19, 2025. State conformity varies significantly:
The §199A 20% pass-through deduction was originally a TCJA provision set to expire after 2025. OBBBA made it permanent at the federal level. Most states do not conform to §199A because it reduces taxable income below what states consider appropriate - states generally tax pass-through income at the partner/shareholder level without a similar deduction. California, New York, and most other states with income taxes do not allow a §199A equivalent deduction. The effective state tax rate on S-corp or partnership income is therefore higher than the federal rate for most pass-through owners.
OBBBA made the federal estate tax exemption permanent at $15 million. Most states do not have their own estate tax, so this change is irrelevant at the state level. However, several states still have their own estate taxes with much lower exemptions: Massachusetts ($2 million exemption), Oregon ($1 million exemption), Minnesota (approximately $3 million), Washington State (approximately $2.193 million), and several others. Residents of these states face state estate tax obligations even when no federal estate tax is owed. The OBBBA federal exemption increase does not affect state estate taxes.
The SALT cap for individual itemized deductions has been significantly modified by OBBBA. For tax years 2025 through 2029, the cap is $40,000 for married filing jointly (with phase-down above $500,000 MAGI), $20,000 for married filing separately, and $15,000 for single and head of household filers. After 2029, the cap reverts to $10,000. Pass-through entity tax (PTET) elections - which allow partnerships and S-corps to pay state income tax at the entity level and deduct it as a business expense, bypassing the individual SALT cap - remain powerful planning tools in most states. As of 2026, 43+ states have enacted PTET elections. Verify the current SALT cap, phase-out thresholds, and PTET availability in your specific states with current guidance.