Are IRA Deductions Allowed on New York Income Tax?

New York state is a separate governmental entity from the federal government. Accordingly, the state raises its own revenue through a state taxation program. While state taxes generally are based in some form from your federal income taxes, you may not always be able to take the same deductions. With respect to IRA deductions, New York has a similar approach to IRA deductions you can make on a federal level.

New York tax law allows individuals who are eligible to take a deduction for IRA contributions on their federal tax return to take the deduction on their state income tax return as well. New York does not have any special eligibility rules that it imposes on top of federal eligibility rules.

To claim a deduction for IRA contributions at the federal and New York state levels, a taxpayer must meet certain eligibility requirements. First, the taxpayer must be under the age of 70½ at the conclusion of the tax year and have taxable compensation. The amount you may deduct is based on your tax filing status, your modified adjusted gross income and whether you or your spouse are covered by a retirement plan at work. For example, as of 2011, you may not receive a full deduction if you have a modified adjusted gross income of more than $56,000 and you are covered by a retirement plan at work.

Because IRA contributions are deductible, there are limits to the amount a taxpayer may contribute during a particular tax year. This contribution limit is adjusted annually to reflect inflation. In 2011, taxpayers may contribute up to $5,000. If you have attained age 50, you may be eligible to make additional contributions, called catch-up contributions, equal to $1,000.

Since the starting point for your New York state income taxes is your federal adjusted gross income, you will not need to separately report your contributions to your IRA. For administrative simplicity, New York has its taxpayers aggregate certain information. You will be required to report the total federal adjustments to your income on line 11 of your Form IT-201, Resident Income Tax Return (long form) or line 10 of your Form IT-150, Resident Income Tax Return.