Residents who live in New York State must file a state income tax return in addition to a federal tax return each year. Though the state implements a lower overall income tax rate than the federal government, residents still have access to deductions and credits similar to those available to federal taxpayers.
As with federal income taxes, New York State residents may take a standard deduction for themselves, as well as for a spouse if filing taxes jointly. The standard deduction is subject to adjustment from year to year, but at the time of publication, it was $7,500 for single taxpayers and $15,000 for married taxpayers filing jointly. In addition to the standard deduction, dependents, such as children and relatives who meet the dependent guidelines outlined in Section 152 of the Internal Revenue Code, qualify for an exemption of $1,000 each. Taxpayers who choose the standard deduction need only file New York's short tax form, IT-150.
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New York taxpayers who itemized deductions for federal income tax purposes may do the same for state tax return as well. New York accepts the same tax deductions as the federal government does. Examples include deductions for charitable contributions, excessive medical expenses, home mortgage interest and contributions to a qualified retirement fund. Taxpayers who choose itemized deductions must complete and file New York's long tax form, IT-201.
New York places limitations on high-earning taxpayers who itemize tax deductions. The state will not recognize any itemized deductions other than charitable contributions for residents with incomes that exceed $1 million. Of those charitable contributions, New York limits the state deduction to 50 percent of the corresponding federal deduction amount. The state further limits charitable contribution deductibility for its residents who earn more than $10 million annually – capping them at 25 percent of the corresponding federal deduction amount.
Like the federal government, New York offers its residents a number of tax credits that directly lower overall tax liability. Many of those credits are refundable, meaning that residents may claim them even if they have a zero tax liability. Examples of state tax credits include the Empire State Child Credit, which is worth up to 33 percent of the federal child tax credit per qualifying dependent child, and the earned income credit, which is worth up to 30 percent of the federal earned income credit for low to moderate-income households. For additional information about state tax credits, contact the New York Department of Taxation and Finance.