State Income Tax Breaks in New York

If you live in the State of New York, in addition to your federal income tax you have the added burden of the state income tax. And if you live in New York City, you also have a city tax to pay. It is important that you take advantage of all the tax benefits available to you. If you use tax software to prepare your return, these benefits might be calculated automatically or you may be prompted to claim the benefits you qualify for. But you should be aware of these tax benefits and check your New York return before you send it in to be sure you have claimed all the benefits you are eligible for. And, if you prepare your tax return on paper, you need to know which tax breaks you can claim.

You prepare your New York state income tax return using Form IT-150 (resident short form), IT-201 (resident long form), or IT-203 (nonresidents and part-year residents). You can see the Combined Instructions for Forms IT-150 and IT-201 or the Instructions for Form IT-203 to determine which form you should use. You start with the income and adjustments you reported on your federal return to determine your federal adjusted gross income. Then you calculate your New York additions and subtractions to arrive at your New York adjusted gross income. From this amount you deduct your New York standard deduction or itemized deductions and dependent exemptions to determine your taxable income.

Depending on the amount of your taxable income you find your tax in the New York tax table or you use the tax rate schedule. If your New York adjusted gross income is over a certain amount, you have to make a special tax calculation. Once you determine your tax, you add any voluntary donations you want to make and subtract the New York state income tax withheld from your income and any estimated payments you made during the year. You also subtract any credits you qualify. The end result is your refund or the balance of tax you owe.

New York subtractions

If you included a New York state or local tax refund in your income on your federal tax return because you had claimed an itemized deduction for the taxes the prior year, you can subtract this refund on your New York state tax return.

If you received a pension from the New York state government, a local government within the state, or from the federal government that was included in your income on your federal tax return, you can subtract that pension income on your New York state income tax return. This includes pensions from certain public authorities such as the Metropolitan Transit Authority (MTA) Police 20‑Year Retirement Program, the Manhattan and Bronx Surface Transit Operating Authority (MABSTOA), and the Long Island Railroad Company.

Any social security or railroad retirement benefits that were included in your federal tax return can be subtracted on your New York state tax return. These benefits are not taxable in New York. Interest income from U.S. Government obligations, such as savings bonds and treasury bills, that are included in your federal tax return, are also subtracted on your New York state tax return.

If you are age 59 ½ or older, you can subtract up to $20,000 in pension and annuity benefits that were included in your income for federal tax purposes. This includes pensions you receive from a former employer and distributions from government deferred compensation plans. It also includes distributions you take from your IRA or from an annuity contract, distributions from a Keogh plan, and benefits you receive from a cafeteria plan or from a profit sharing or stock bonus plan. If you are married, each spouse can subtract up to $20,000. And if you are the beneficiary of a decedent's pension and annuity income, you can also make this subtraction.

If you are totally and permanently disabled before reaching retirement age, you can exclude part of your disability pay. The amount you can exclude is your actual weekly disability pay or $100 a week, whichever is less. To claim the exclusion you need to file Form IT-221.

You can deduct up to $5,000 ($10,000 if you are married filing jointly) in contributions to a New York 529 college savings plan. And, if you are a beneficiary of one of these plans and you receive distributions from the plan that you had to include as income on your federal tax return, you can deduct that amount on your New York return.

Residents in continuing-care retirement communities can claim a deduction for the portion of the fees attributable to providing long-term care. This deduction is subject to limits that range from $310 up to $3,850, depending on age.

If you received an accelerated death benefit payment, payment of a special surrender value under a life insurance policy, or a viatical settlement due to a terminal illness or medical condition that requires extraordinary treatment, and you had to include the payment as income on your federal tax return, you can subtract that amount on your New York state return.

If you received military pay for active service as a member of the U.S. Armed Forces in a combat zone, and you had to include any of that income on your federal tax return, you can subtract it on your New York state return.

Credits

If your federal adjusted gross income is below certain levels according to your filing status, you can claim the New York Household Credit. This credit ranges from $2.50 up to $75.00 depending on your filing status and level of income. If you are a resident of New York City, there is an additional household credit. You can find tables in the instructions to determine the amount of your credit.

If you qualify for the federal child credit, you can qualify for the Empire State Child Credit. To claim this credit you need to complete New York State Form IT-213. And, if you qualify for the federal child and dependent care credit, you can claim the New York State child and dependent care credit on Form IT-216. If you are a resident of New York City, you could qualify to claim the same credit against your city taxes.

If you can claim the federal earned income credit, you could claim the New York State earned income credit on Form IT-215. New York City residents can claim an additional earned income credit. If you are a noncustodial parent and have paid child support, you could qualify for the Noncustodial Parent New York State Earned Income Credit on Form IT-209.

If your household income is $18,000 or less and you pay real property taxes or rent, you can claim the Real Property Tax Credit on Form IT-214. The credit can be up to $75 if all the members of your household are under age 65, and if at least one member is 65 or older, the credit can be as much as $375.

If you paid undergraduate college tuition for yourself, your spouse or a dependent, you could qualify for the New York college education credit for up to $400 per eligible student. To claim this credit you file Form IT-272. If you itemized deductions on your federal tax return, you may get a greater tax benefit if you claim the college tuition as an itemized deduction on your New York state tax return. There is a worksheet in the instructions for Form IT-272 that will determine which gives you the greater benefit - the college tuition credit or the itemized deduction.

If you live in New York City and your federal adjusted gross income is $250,000 or less, you can claim a New York City school tax credit of $145 or $290, depending on your filing status. This credit is claimed directly on Form IT-150 (short form) or on Form IT-201 (long form).

If you paid taxes to another state or local government or to a province of Canada, you can claim a credit on your New York tax return for the taxes you paid to the other state or Canada. To claim a credit for taxes paid to another state or local government, you must complete New York Form IT-112-R and for taxes paid to a province of Canada, Form IT-112-C.

If you purchase bioheat, such as biodiesel fuel, that you use for space heating or hot water in your residence, you can claim a tax credit of $0.01 for each percent of biodiesel included in the heating fuel, up to a maximum of $0.20 per gallon. To claim this credit you must complete Form IT-241.

If you purchase and install fuel cell electric generating equipment, you can claim a credit for 20% of your expenditures, up to a maximum credit of $1,500 for each unit. This credit is claimed on Form IT-259.

If you purchase and install a solar energy system for heating, cooling, hot water, or to produce energy at your residence, you can claim a credit for 25% of the cost, up to a maximum credit of $5,000. You need to complete Form IT-255.

Volunteer firefighters and ambulance workers can claim a $200 credit on their New York tax return by completing Form IT-245.

Sources:
IT-150/201-1 Instructions - New York State Department of Taxation and Finance