There are New York State tax modifications to taxpayer’s federal return. Understanding what is taxable and what is not can be a complex issue, especially when it comes to taxes. In this article, we’ll explore some of these items in simple language.
First of all, let’s understand the basics. The federal government sets tax laws that apply to all Americans, regardless of which state they live in. However, each state can have its own tax laws that differ from federal tax laws. New York is one of the states that has its own tax laws. This means that while federal tax laws apply to all New Yorkers, state tax laws may differ.
One item that is taxable on a federal return but not taxable in New York is municipal bond interest. Municipal bonds are issued by state and local governments to fund public projects such as schools, hospitals, and highways. The interest earned on municipal bonds is usually exempt from federal income tax, but it is not always exempt from state income tax. However, in New York State, municipal bond interest is exempt from state income tax. This means that if you earn income from municipal bonds, you will not owe any state income tax on that income in New York.
More New York State Tax Modifications
Another item that is taxable on a federal return but not taxable in New York is income earned in other states. If you work in another state, you may be subject to state income tax in that state, even if you don’t live there. This income is taxable on your federal return, but it may not be taxable in New York. New York has what is known as a “convenience of the employer” rule, which means that if you live in New York but work in another state for the convenience of your employer, you may not owe state income tax in that other state. However, if you work in another state and it is not for the convenience of your employer, you may owe state income tax in that state.
Additionally, New York State has a unique tax law that applies to certain types of income earned by non-residents of the state. For example, income earned from the sale of intangible personal property, such as stocks, bonds, and mutual funds, is not taxable in New York if the seller is a non-resident. This means that if you live outside of New York but sell stocks, bonds, or mutual funds that are located in New York, you will not owe any state income tax in New York.
Another item that is taxable on a federal return but not taxable in New York is certain retirement income. If you receive retirement income from a qualified retirement plan, such as a 401(k) or an IRA, that income is taxable on your federal return. However, in New York State, certain types of retirement income are exempt from state income tax. For example, income from a New York State or local government pension plan is exempt from state income tax.
Other NYS modifications
Finally, New York State has a unique tax law that applies to certain types of property. In New York, property tax is levied by local governments, and the amount you owe is based on the value of your property. However, certain types of property are exempt from property tax in New York. For example, property used for religious, charitable, or educational purposes is exempt from property tax.
In conclusion, there are specific items that are taxable on a federal return but not taxable in New York State. For example, municipal bond interest and income earned in other states. Certain retirement income including NYS pensions and federal pensions. It’s important to understand the difference. This will ensure that you are paying the correct amount of taxes on your state and federal tax returns.