1. Overview of New York State Income Tax
The New York state personal income tax is levied on individuals that are residents of New York as well as nonresidents of New York. New York residents are taxed on their worldwide income while nonresidents are taxed only on income earned in New York (such as wage income from work days in New York).
New York taxable income is computed in a similar manner as federal taxable income with a variety of differences. Generally, New York tax law follows federal tax law as far as items of income that are taxable and deductions that are allowed.
New York imposes tax at graduated rates between 4% and 6.85%.
New York City taxes also its residents at graduated rates up to 3.648%.
New York tax returns are due the 15th day of the 4th month following the tax year. A 4 month extension for filing the New York return may be requested by filing Form IT-370, if a tax payment is due, or New York will accept a copy of the federal extension for filing (Form 4868). At least 90% of New York tax must be paid by April 15th.
A New York resident includes:
1. An individual who is not domiciled in New York but maintains a permanent place of abode in New York and spends more than 183 days in New York during the taxable year, or
2. An individual who is domiciled in New York, unless all 3 conditions are met in either Category A or B:
- They did not maintain any permanent place of abode in New York State during the tax year;
- They maintained a permanent place of abode outside New York State during the entire tax year; and
- They spent 30 days or less in New York State during the tax year.
- The taxpayers were in a foreign country for at least 450 days during any period of 548 straight days; and
- The taxpayers spent 90 days or less in New York State during this 548-day period, and their spouses (unless legally separated) or minor children spent 90 days or less in New York during the 548-day period in a permanent place of abode maintained by the taxpayers; and
- During the nonresident portion of the tax year in which the 548-day period either started or ended, the taxpayers were present in the state for no more than the number of days which bears the same ratio to 90 days as the number of days in such portion of the tax year bears to 548.
Domicile is the place where the taxpayer has a permanent home. It is the place where the taxpayer intends to return if they are living or working temporarily in another state or country. Some items considered in determining "legal domicile" are: location of residences, where the individual spends their time, location of personal possessions, the individual's active business involvement, and family connections.
If an individual is resident in New York, the individual is subject to New York income tax on all worldwide income earned during the period of New York residency.
Residency is determined separately for each person. It is possible that one spouse can be resident in New York while the other is not. Generally, your filing status for New York tax purposes is the same as for federal tax purposes. However, if a couple files a joint federal return, and one spouse is a New York State resident but the other is a nonresident or part-year resident, they must file separate New York State returns. They are required to determine their New York income separately, and must determine their New York adjusted gross incomes separately as if their federal adjusted gross incomes had been determined separately.
3. Treatment of Part-year Residents
Part-year residents are generally taxed in New York on their worldwide income for the part of the year in which they are resident. A part-year resident (and nonresidents as well) must first determine their New York tax based on their full year taxable income (computed according to New York rules). Then, New York tax is prorated based on the percentage of New York income to full-year worldwide income. This methodology is different than most states and may have the affect of taxing part-year residents at higher tax rates.
4. Avoiding Double State Taxation
New York allows resident and part-year resident taxpayers to claim a credit for taxes paid to another state (or Canadian province) on income that is subject to both New York income tax and income tax in the other state. The amount of the credit is the lesser of the income tax paid to the other state, or the ratio of income taxable in the other jurisdiction to total New York income. This might be the case if you are domiciled in New York, but work in another state.
5. Home Sale Treatment
New York follows the federal law for taxing the gain on the sale of a principal residence. Further, any loss on the sale of a principal residence is not deductible (the same as federal purposes).
6. Moving Expense Treatment
New York generally follows the federal rules for deducting moving expenses. However, in order for moving expenses to be deductible in New York, the moving expenses must be connected to income from New York sources for nonresidents, or for a move into New York for part-year residents.
7. Allowable Deductions
New York provides for a standard deduction to reduce taxable income. In addition, New York allows for taxpayers to itemize their deductions rather than claiming the standard deduction if itemized deductions were claimed on the federal return. New York itemized deductions are similar to federal itemized deductions. New York does not allow personal exemptions for the taxpayer or spouse, but dependent exemptions are allowed.
8. Special Rules for U.S. Expatriates
New York does accept the automatic federal extension until June 15th for U.S. persons that are outside the country on April 15th.
New York does allow the foreign earned income and housing exclusions that may be claimed for federal tax purposes.
New York does not allow a credit for income taxes paid to other countries, but does allow a credit for taxes paid to a province of Canada. Taxpayers electing the federal foreign tax credit are only allowed the portion of a Canadian provincial income tax not claimed for federal purposes for the taxable year or a prior taxable year.
9. Special Rules for Visa Holders Living or Working in New York
It is possible for a foreign national to claim nonresident status in New York for an extended period of time if their domicile is not in New York and they are in New York for temporary or transitory purposes. This might be advantageous if the foreign national has significant foreign investments that would be subject to New York tax as a New York resident.
10. Where to get New York State Income Tax Information and Forms
The New York Franchise Tax Board's web site is an excellent source of information including forms and filing instructions at www.tax.state.ny.us
If you are a New York full-year resident, you will need to file Form IT-201. If you are a part-year or nonresident of New York, you will need to file Form IT-203. New York City residents, and Yonkers residents and nonresidents file Form Y-203, which is attached to the New York state return.