Does New York Allow Itemized Deduction Of State Income Taxes Paid?

Home Fairmark Forum Taxation of Investments Does New York Allow Itemized Deduction Of State Income Taxes Paid?

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  • #8264
    Ryan1
    Participant

    I think I know the answer to this question, but would like to get some definitive confirmation if possible since the laws regarding itemized deductions in New York changed in the past couple of years.

    My understanding is that New York DOES NOT currently allow a deduction for state *INCOME* taxes paid when itemizing deductions. So any state income taxes you paid, including any state income taxes paid to the state of NY, during the tax year are NOT deductible if you itemize deductions on your New York State tax return.

    PROPERTY taxes paid on property owned in New York ARE deductible, but not state *INCOME* taxes paid.

    This sounds right, but if anyone can definitively confirm it that would be great.

    Thank you!

    • This topic was modified 2 weeks, 3 days ago by Ryan1.
    #8276
    Ryan1
    Participant

    Apologies. I just realized that this question should have been posted in the “Other Tax Topics” forum. I don’t know any way to change that now that it is posted.

    Still hoping to get confirmation of this answer.

    Thank you.

    #8280
    Bob99
    Participant

    Your understanding is correct.

    I don’t think you’ll find a clear direct statement from the state about what is and is not deductible. The New York tax return goes about it in a roundabout way, first adding up all the federal deductions, including state income tax (but without the $10,000 cap), then subtracting out the state income tax later. See Form IT-196 and the instructions for that form. State income tax is entered on line 5, then subtracted on line 41.

    #8302
    Ryan1
    Participant

    I’ll try this last time to post this. I seem to have a problem posting on this site. I posted this a few days ago, and the post appeared. Then when I went to look at it again in less than a minute it was gone. Oh well… here it is again. Hope it stays…

    Thank you kindly for that confirmation Bob99! You cited precisely the Form and lines that prompted me to ask this question.

    I am assisting a family member in determining whether or not they should file an amended NY state income tax return for the years 2018 and 2019 in light of the changes in NY tax code that applies in those years and the fact that they paid an extraordinarily large amount of NY state income tax in both years due to large capital gains. They had taken the standard deduction on their NY returns so I wanted to see if they would benefit from itemizing in light of those facts.

    I read a lot about how NY was trying to circumvent the SALT cap and after briefly reviewing IT-196 noticed that line 5 included state income taxes. My initial impression was that NY allowed unlimited deductions for state income tax in which case they would benefit from itemizing and filing amended returns.

    Then, as you also point out, I saw that apparently any state income taxes on line 5 are removed on line 41. It was disappointing, but not surprising. I wanted to be sure I wasn’t missing anything because NY was touting their SALT rebellion as a benefit for taxpayers. NY is notorious for handing out ice in winter and telling you what a favor they are doing you.

    At least it saves the trouble of having to file the amended returns.

    The problem isn’t that the SALT cap penalizes high tax states. The problem is that the taxes in these states are too high!

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