State Taxes on Your Retirement Income in New York

If you retire in New York, you may be subject to state income tax at rates that range from 4.0% up to 8.97%. The maximum state income tax rate was increased in 2010 from 6.85% to 8.97% for households with taxable income over $500,000, regardless of filing status. For taxpayers with taxable income of less than $500,000 the rate increases from 6.85% to 7.85% for single taxpayers with income above $200,000, heads of household with income over $250,000, and married couples filing jointly who have income of over $300,000. The New York City income tax rate was also increased up to a maximum rate of 3.876% on taxable income over $500,000.

There are certain types of retirement income that are exempt and other tax breaks that can reduce your state and local income tax burden in New York.

Social security and railroad retirement

Social security and railroad retirement benefits are not subject to state income tax in New York.

Government pensions

Pensions from the federal government, New York state government or a local government in New York are not subject to state income tax in New York. This includes pensions from 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, and various other local government retirement systems.

Military pensions

Military pensions received by veterans or their beneficiaries are completely exempt from state income tax in New York and city income tax in New York City and Yonkers.

Other retirement income

If you are age 59 ½ or older, you can exclude up to $20,000 in private pensions including government pensions outside New York state, pensions from a former employer, distributions from deferred compensation plans, periodic and lump sum payments from an IRA, periodic payments from an annuity contract purchased by your employer, distributions from a Keogh plan, and benefits from a cafeteria plan, profit-sharing, or stock bonus plan. If you are married and both spouses have private pension income, each spouse can exclude up to $20,000.

Disability income

If you retired on total and permanent disability before reaching retirement age, you can exclude your actual weekly disability pay or $100 a week, whichever is less.

Interest and dividends on government obligations

Interest income from state and municipal obligations outside New York is subject to New York state income tax. This includes dividends from mutual funds that invest in state and municipal bonds outside New York. But interest from municipal bonds or other obligations in New York is exempt.

Interest on federal government obligations such as U.S. savings bonds, or Treasury bills or notes that you included on your federal return are not subject to state income tax in New York. This includes income from mutual funds that invest in U.S. government obligations.

Long-term residential care deduction

If you reside in a continuing-care retirement community, you can claim a deduction for the portion of the fees that is attributable to the cost of proving long-term benefits under a continuing care contract. The amount of the deduction depends on the fees you pay and your age, up to a certain maximum deduction that is adjusted each year.

Long-term care insurance credit

If you pay premiums for long-term care insurance, you can claim a credit on your New York state income tax return for 20% of the premiums you pay.

Real property tax credit

New York residents with household income of $18,000 or less can claim a real property tax credit, whether they own their home or rent. If at least one member of the household is 65 or older, the credit can be up to $375.

New York City school tax credit

If you live in New York City and your income is $250,000 or less, you can claim a credit for New York City school taxes. The credit is $125 if you are married filing jointly or are a surviving spouse, and $62.50 for other filing statuses.

Sources:
Combined Instructions for Forms IT-150 and IT-201- New York State Department of Taxation and Finance
General Information for Senior Citizens and Retired Persons - New York State Department of Taxation and Finance
Information for military personnel & veterans - New York State Department of Taxation and Finance
New York City Resident Tax Rates - New York State Department of Taxation and Finance
Taxes by State - New York - Retirement Living Information Center