Understanding New York Tax Law

Published: 29th January 2021

Tax season is here again, and if you're one of the people who decided to stay New York strong during the COVID-19 pandemic and not flee the city, it's time for you to file your New York taxes.

Life in the "Greatest City in the World" can be stressful enough in normal years. This past tax year saw infectious disease run rampant, businesses shut down, massive unemployment, and civil unrest.

We're all hoping for a saner, calmer 2021. The first step for that is to bone up on your New York tax law.

Have you received your W-2? You shouldn't wait until the deadline. Read on to learn more about the New York income tax and file today.

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New York Tax Calculation

Understanding New York Tax Law - Life in the Big Apple can be intense, and so can your taxes. Read on to gain a better understanding of New York tax law.

If you've lived in New York for a while, you know that the state has some of the highest tax burdens in the U.S. The average New Yorker should expect to pay up to 14% of their income toward their total tax burden!

Neighboring states like Connecticut pay, on average, 10.6% while Pennsylvania comes in at a 9.7% average. While a few percentage points don't seem like a big deal, you know it is when you file taxes.

Why do New Yorkers pay such a high percentage of their income? Think about all the infrastructure provided to the average New Yorker. You have access to a massive public transportation system, including a subway.

There are also public works to pay for. Those employed by the city and the state keep our roads and other important infrastructure safe. They keep parks maintained and clean.

When you break it down, the average New Yorker pays the third-highest income per capita, the highest income tax collection, the fourth-highest in property tax, and the seventh highest in sales tax.

When you add that all up, New Yorkers face the highest average tax burden in the United States.

New York Income Tax: State

To understand your taxation, let's get into the weeds and break down all the important aspects of your New York Income Tax.

Standard Deductions

New York State offers standard income tax deductions for returns that are not itemized. Your deduction amount depends on your filing status.

For single folks claimed as a dependent, your deduction will be $3,100. For folks who are single, yet not claimed as a dependent on someone else's returns, you receive an $8,000 deduction.

As you get married and have children, your New York State standard deduction rates increase. Head of household filing status brings with it a standard deduction of $11,200, while a married filing jointly status is $16,050.

If you're married yet filing separately, your deduction decreases to the single amount of $8,000. Should you be widowed, your standard deduction is the $16,050 amount that's the same as the married filing jointly status.

Itemized Deductions and Credits

New York State allows for most deductions you make on your federal return.

It should be noted that New York State and the IRS recently broke apart, meaning it is possible for you to claim credits and deductions on your state return you didn't on your federal return.

Here are some of the deductions and credits you need to know when you file New York State Income Tax.

  • 529 Plan: New York's 529 Plan is a state-run college tuition savings program. You can deduct a set amount depending on your filing status, or the actual amount contributed. The lesser amount gets deducted.
  • College Tuition: College tuition can be either a deduction or a credit. The catch is, this credit or deduction ONLY covers undergraduate tuition paid to an approved institution of higher learning. It does not cover room and board.
  • Child and Dependent Care: This credit covers child or dependent care costs while you work or attend school.
  • Household Credit: An Adjusted Gross Income (AGI) of a single person less than $28,000 or a married couple less than $32,000 qualifies for this credit.
  • Empire State Child Credit: This credit is available to those single with an AGI of less than $75,000 or a married couple less than $110,000. You can receive up to 33% credit for your qualifying children.
  • Real Property Tax Credit: This credit is available for all qualifying New York State property owners who own property valued at less than $85,000. You can receive a credit of up to to $375.

New York City Income Tax

If you live in New York City, your New York tax calculation also includes the New York City Income Tax. This is a progressive income tax based upon your income. You file this income tax on your New York State Income Tax form.

Every income-earning New York City resident must pay these taxes, as well as city employees hired after Jan 4th, 1973 who do not reside within the city's limits.

New York City doesn't offer the types of deductions like your federal or state taxes, but you can receive a few noteworthy credits. Here are some of the important ones to know.

  • Child and Dependent Care: Those with qualifying children and an AGI household income of less than $30,000 qualify for this credit. You can receive up to 75% of your state credit and can receive both depending on income.
  • Earned Income Tax Credit: Those who qualify for this credit receive up to 30% of their federal earned income tax credit. This credit is available to you if you're a full or partial year New York City Resident.
  • School Tax Credit: Full-time or part-time New York City residents who aren't claimed as dependents on someone else's return qualify for this credit. Those who are married and make less than $250,000 can receive up to $63.

Know New York Tax Law

2020 was a rough year. Get 2021 off to the best start possible by understanding New York tax law to pay the least amount possible.

Though tax law seems intimidating, especially when your income fluctuated or you received any kind of unemployment compensation, it doesn't have to be.

Our online tax calculator covers many different countries, including the United States. Use our calculator to determine what credits you qualify for and how much you owe in New York.