Addback
Tax Glossary Term
Definition
An addback is a state income tax adjustment that adds back to state taxable income a deduction or exclusion that was taken on the federal return but is not allowed under that state's tax code. Addbacks arise when a state does not conform to a particular federal provision. The most common addbacks in 2026 involve the new OBBBA deductions: if a state has not conformed to IRC Sections 224 and 225, the tips and overtime deductions claimed on federal Schedule 1-A must be added back on the state return, increasing state taxable income. Other common addbacks include bonus depreciation (Section 168(k)), the Section 199A qualified business income deduction in states that decoupled, and state or municipal bond interest from other states. The mechanics are straightforward: the taxpayer starts with federal AGI (or federal taxable income) on the state return, then adds back the disallowed amounts on a designated state schedule. Addbacks do not affect federal tax, only state tax.
Example
A bartender in a non-conforming state claims a $20,000 tips deduction federally.
Federal AGI before tips deduction: $55,000.
Federal tips deduction: −$20,000.
Federal AGI: $35,000.
State return starts from federal AGI ($35,000) and adds back the $20,000 tips deduction.
State taxable income (before state deductions): $55,000.
The addback restores the income the state does not exclude.