For most of the 92 years since the federal income tax was established, the states followed Washington’s lead concerning how to tax people and businesses. That ended in 1981, when 21 states adopted their own rules on depreciation in response to a Reagan tax cut. Many of these renegades — California being a notable exception — later went back to a more uniform tax code. But the precedent was set. When Congress began slashing federal rates in 2001, many cash-strapped state legislatures opted to go their own way once again.
Tax experts call this “decoupling.” That’s a jargony name for a practice that can — and most likely will — cause you to run screaming to your accountant. “It is a zoo,” says Jere Doyle, an estate-planning and tax expert in Mellon Financial’s Boston office. “Everybody thinks ‘federal, federal, federal,’ and assumes that the same rules will apply at the state levels. But they do not