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Living in the Empire State has its many perks, but they definitely come with a tradeoff. Taxes in New York are some of the highest in the nation, so whether you’re a current resident or preparing for a move, it’s important to educate yourself on the New York state tax laws.

You might expect to pay income, property, and sales tax, but did you know that N.Y. is a state with one of the some of the strangest tax laws, like the $0.08 tax on any bagel that’s sliced and served to be eaten? Read on to learn more about all the taxes you’ll be responsible to pay as a New York citizen (spoiler alert: there are a lot!).

Overview of New York State Taxes

Before diving into the New York tax code, we need to clarify the difference between state taxes vs. federal taxes. Federal income tax is collected by the Internal Revenue Service (IRS) and assessed on most of the working class in the United States. The money goes straight to the federal government to finance the budget for national defense, health care expenses, family assistance programs, and so forth, as determined by the elected policymakers.

State taxes are similar, but they’re assessed and collected by the individual states. Each state has the right to collect whatever tax they so choose (so long that it’s not forbidden by the constitution), and they also get to decide which income is taxable, what rate it will be taxed at, and where the tax revenue will go.

You’ll need to use a separate federal income tax calculator and New York tax calculator to determine how much you’ll owe to each agency, as the New York tax brackets are different at the state level.

New York State Taxes: Quick Facts
Income tax: 4% - 8.82%
Sales tax: 4%
Property tax: 1.65%
Annual 2019 Tax Burden ($75,000/yr income)
Income Tax
Sales Tax
Property Tax
Total Estimated Tax Burden
Remaining Income = $64,147
New York State Tax Brackets

The New York tax bracket is progressive (similar to the federal income tax bracket) so the more you earn, the more you pay. Depending on income level and filing status, there are eight different New York income tax rates ranging from 4% to 8.82%, as of 2019.

New York Tax Calculator
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Filling Status

New York state tax rates increase as income increases. Those with income less than $16,000 are taxed as low as 4%, however, the widest bracket for those earning between $40,000 and $300,000 is taxed at 6.85%.

New York Personal Income Tax

The personal income tax in New York is broken into the above brackets based on earnings and filing status. New York tax brackets are different than the federal ones which, under Trump’s tax reform plan, range between 10% and 37% of personal income.

Additional differences between filing a federal tax return and a New York state tax return include:

  • The ability to deduct contributions to New York’s 529 plan
  • The ability to claim a tax credit or tax deduction for college tuition
  • The ability to exclude pension income from taxation

We’ll talk more about the New York tax breaks in greater detail below, or you can chat with an expert at Community Tax who can show you all the different ways to save money on your tax return living in the Empire State

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City Taxes in New York State

At 8.82%, the New York state top marginal tax rate ranks ninth-highest in the country out of all 50 states—the top three are California at 13.3%, Hawaii at 11%, and Oregon at 9.9%. Comparatively, the N.Y. tax rate might not sound that bad, but there’s a catch: depending on where you live, you may face additional city taxes that significantly raise your financial obligation.

New York City Resident Tax If you file New York taxes using Form IT-201 and live in the Big Apple—home to 8.55 million—you’ll pay an additional New York City Resident Tax that ranges between 3.078% and 3.876% depending on your income and filing status. That can take top earners to a 12.696% tax rate to live in New York City.

Yonkers Resident Withholding Tax N.Y. residents living in Yonkers are subject to the Yonkers Resident Withholding Tax and will also face a surcharge if they have to file a New York tax return. Here’s the difference: Yonkers taxes you if you live or work in Yonkers, but NYC only taxes you if you live there (meaning you are not taxed on the work performed there). So, if you live outside of Yonkers but work in NYC, you will not face taxation from either city.

Metropolitan Commuter Transportation Mobility Tax (MCTMT) Those who are self-employed and live in Yonkers face more bad news: the MCTM tax for individuals and partnerships whose net earnings exceed $50,000. If all of your business activity is carried within the MCTM, then all of your net earnings from self-employment are allocated (attributed) to the MCTM.

Business activity” is carried on inside the MCTD if you have, maintain, operate, or occupy desk space, an office, a shop, a store, a warehouse, a factory, an agency, or other place located in the MCTD where your business matters are systematically and regularly carried on.

If you carry business activity both inside and outside of the MCTD, only a portion of your earnings from self-employment are allocated to the MCTD. According to New York state tax law, you must allocate these net earnings for the purpose of:

  1. Determining whether or not the annual threshold for the applicable tax year has been met, and
  2. Computing the amount of MCTD tax due

Maintaining thorough business records and detailed bookkeeping is especially important for New Yorkers living in this area—at least if you don’t want to pay more than you have to in taxes.

Without clear records that fairly and equitably show net earnings from inside and outside of the MCTM, you’ll have to use the formula method (business allocation percentage) or another method that has been authorized by the Commissioner of Taxation and Finance. This amount is usually larger than what you would have had to allocate, causing you to face increased taxation.

You worked hard for your self-employment income. Our bookkeepers will make sure you don’t have to pay a cent more to the MCTMT than necessary.

Note: If you’re filing New York state income taxes with Form IT-203, you may or may not be subjected to the NYC tax, Yonkers tax, and MCTMT tax; read IT-203 instructions or talk to a Community Tax professional for more information.

New York Capital Gains Tax

Capital gains refer to profits made from the sale of a capital asset, such as an investment property, stock, bond, and even collectibles like art or precious metal. At the federal level, the tax rate on capital gains depends on how long you’ve had the asset which you profited off of.

Short-term capital gains are held for less than a year and are taxed at your ordinary income tax rate; long-term capital gains are held for over a year and are taxed at 0%, 15%, or 20% depending on your income and filing status.

Unfortunately, if you live in New York and made money on an investment, it won’t matter how long you’ve held the capital asset. Similar to the California state tax code, New York does not offer tax breaks to its investors; any capital gains you earn must be recorded as personal income and will be taxed at your ordinary income tax rate.

Depending on the profit you earned, this additional income might place you into the next tax bracket, thereby increasing your tax rate. Use our New York income tax calculator to estimate how much you owe to the state.

New York State Sales and Use Tax

In most cases, personal income tax is withheld by your employer from your paycheck based on the information you report on IRS Form W-4 (unless you are self-employed, in which case you are personally responsible for withholding your own taxes). However, New Yorkers face additional state taxes on the purchases they make, which makes the cost of living in the Empire State much more expensive.

New York state sales tax applies to retail sales of certain tangible property and services, but the rate at which a sale is taxed depends on the type of item sold. Some items are exempt from sales tax in New York, such as prescription drugs, feminine products, laundering or dry cleaning, newspapers, and groceries.

While you can catch a break on those buys, a number of goods and services are subject to sales tax in New York. The chart below displays an additional NYC sales tax, but keep in mind that local tax rates vary by county.

Category of Good or Service
New York (and NYC) Sales Tax
  • Personal Property (furniture, electronics, etc.)
  • Gas, electricity, refrigeration, steam, telephone, and telegraph services
  • Detective, cleaning, and maintenance services
  • Occupancy of hotel and motel rooms
  • Food and beverages sold by restaurants and caterers
  • Admission charges to places of amusement
  • Credit rating and credit reporting services
  • New York state sales tax - 4%
  • New York City sales tax - 4.5%
  • MCTD surcharge - 0.375%
  • Clothing and footwear
  • New York state sales tax - 4%
  • New York City sales tax - 4.5%
    *Purchases under $110 are exempt
  • Beauty, barbering, hair restoring, manicures, pedicures, electrolysis, massage, tanning, tattooing and other, similar services
  • Health and Fitness clubs, weight control, salons, gymnasiums, and similar establishments
  • No New York state sales tax on services, only purchases - 4%
  • New York City sales tax - 4.5%
  • MCTD surcharge - 0.375%
  • Parking, garaging, or storing motor vehicles
  • Minimum local sales
  • New York City sales tax - 10.375%
  • Additional surtax - 8%

If you live in the City that Never Sleeps, you know that parking is a daily struggle—and paying a combined 18.375% in taxes for a place to stash your car only makes matters worse. Thankfully, Manhattan residents may be eligible for the Manhattan Resident Parking Tax exemption and those that qualify would only be taxed at a rate of 10.375%.

Note: New York also charges a 4% use tax if you buy tangible personal property or services outside of the state but use them in New York. That means you can’t beat the system by shopping in a state like Oregon, which doesn’t charge sales tax.

Applicable purchases made within the state are automatically taxed at the time of sale, which is tacked onto the end-price by the vendor. You might not notice the amount of New York state taxes you pay on the day-to-day, but out-of-state visitors will probably notice the difference that shopping in NYC makes on their wallet.

New York Excise Tax

New York excise taxes are flat, per-unit taxes applied to certain items that must be paid to the state government by the merchant before the goods can be sold—but virtually all businesses pass this tax onto the consumer. On average, New York collects $580 in annual excise tax per capita, which is higher than 78% of the United States.

Alcohol Excise Tax in New York

New York compares to the nation’s average in terms of excise tax collected on alcohol. The tax rate is broken into three different categories:

  • New York beer tax - $0.14 per gallon (39th highest state)
  • New York wine tax - $0.30 per gallon (40th highest state)
  • New York liquor tax - $6.44 per gallon (21st highest state)

When you imbibe in the city, you’ll have to pay an additional New York City tax of $0.12/gal on beer purchases and $0.26/liter on spirit purchases.

Tobacco Excise Tax in New York

If you enjoy tobacco, prepare to pay the price for it in New York. The state ranks highest in the nation for excise tax collected on cigarettes.

  • New York cigarette tax - $4.35 per 20 cigarettes (1st highest state)

Tobacco-related products are taxed at 75% of the wholesale price. NYC has an additional excise tax of $1.50 per 20 pack of cigarettes, amounting to an extra tax of $5.85 per pack—which is almost as much as the cost itself.

Medical Marijuana Excise Tax in New York

New York has legalized the sale and use of medical marijuana under the Compassionate Care Act and charges a 7% excise tax on gross receipts. However, this tax may not be added as a separate charge or line item given to the customer and must be paid by one of the five organizations approved by the state to distribute marijuana.

Other states which have legalized recreational marijuana pass this excise tax onto consumers, as seen in the Colorado tax code.

Fuel Excise Tax in New York

Gasoline is taxed at the federal level, but New Yorkers will face an additional state excise tax every time they fuel up at the pump—and the price isn’t cheap.

  • New York fuel tax - $0.0805 per gallon (3rd highest state)

When added to the federal excise tax on fuel ($0.184 per gallon), the total tax on gas in New York is almost an extra dollar ($0.989) per gallon.

Cell Phone Excise Tax in New York

Many states charge tax on cell phone service plans, which is included in the monthly price paid to your provider listed on your bill as “Misc. taxes and Fees” or “Other”.

  • New York cell phone tax - average $17.78 per phone service plan (3rd highest state)
Additional New York State Taxes

These excise taxes are pretty common in most states—but New York imposes an additional tax on sales unique as the colorful diversity of its citizens who call the state “home”. Below are a few common examples you might be shocked to incur as a consumer. Although they don’t input into a New York tax calculator, these purchases definitely contribute to your bottom line as a resident of the Empire State.

Tax on Certain Foods

New York is known for its world-renowned bagels, but if you buy one that’s sliced, you should expect to pay $0.08 more. The “sandwich” tax in New York is complex, considering that burritos and hamburgers are subject to the same additional rate. Generally speaking, if your food is heated, it’s subject to taxation in New York, as is food that’s sold for consumption on the premise and ready-to-be-eaten foods prepared by the seller.

Note: The New York state tax laws on food differ depending on exemption status, whether or not it’s purchased from a vending machine, and the city in which the transaction occurred.

Passenger Car Rentals

Expensive parking and fuel taxes in New York encourage the state’s citizens to avoid driving, but renting a car in the Empire State is also costly. The state charges a 6% sales tax whenever you rent a passenger car, but you’ll face an additional 5% supplemental tax for ordering a car within the MCTD.

Gambling Tax

If you want to test your luck in the Empire State, you’ll need to pay a 3% tax on admission to horse racing events or a 4% tax of pool winnings on regular bets.

Local Jurisdiction Taxes in New York

Remember that N.Y. laws authorize local jurisdictions to impose locally administered taxes separate from the state, such as tax on hotel occupancy, energy, telecommunications, and services like massages and manicures.

New York State Property Tax

Property tax in New York is based on your tax class, which the state has established four of:

  1. Class 1 - 20.919%
  2. Class 2 - 12.612%
  3. Class 3 - 12.093%
  4. Class 4 - 10.514%

You can calculate the New York state tax on your property by taking its taxable assessment (or, its assessed value minus any exemptions) and multiplying it by the tax rate for school districts, municipalities, counties, and special districts. Most homeowners receive two tax bills on property: the first from the school district, the second from the county and/or town.

All property is assessed annually, but in some cases, not all of it is taxable. The most common property tax exemptions in New York include:

  • STAR (School Tax Relief)
  • Senior Citizens exemption
  • Veterans exemption
  • Exemption for persons with disabilities
  • Exemption for agricultural properties

You can read more about the full list of N.Y. property tax exemptions, or simply ask an expert at Community Tax for advice on how you may be able to alleviate the tax burden of homeownership.

In general, property taxes in New York are based on the value of real property and rates have increased 46% over the past seven years. Although your bill may steadily climb, the state’s property tax cap limits how much local governments and school districts can increase annually to 2% or the rate of inflation, whichever is less.

Note: Voters in school districts can override the cap with a 60% vote.

New Yorkers may potentially face two additional taxes unique to state: the mortgage recording tax and the real estate transfer tax. The first applies to the recording of mortgages on real property within the state and the latter is imposed upon conveyances of real property or interests therein when the consideration exceeds $500.

We offer professional help with property taxes.
New York Inheritance and Estate Taxes

Estates valued up to $11.4 million are exempt from federal tax requirements, but if you inherit an estate which exceeds the basic exclusion amount in New York—$5.74 million for deaths after Jan. 1, 2019—you’ll have to pay an estate tax at the state level within nine months of the decedent's passing. Rates are calculated on Form ET-706 and range from 3.06% to 16% of the taxable estate.

New York Estate Tax “Cliff”

Estates in New York are taxed differently than they would be in most other states. Usually, if the value of an estate is large enough to be subject to tax, only the amount that exceeds the exempt portion is taxed—but not in New York. By contrast, the Empire State taxes the full value of any estate that exceeds the basic exclusion.

For example, if you inherit an estate worth $7 million, $5.74 million would be exempt under New York tax code. Other states would tax a percentage of $1.6 million, but New York would impose an estate tax on the full $7 million.

New York State Tax Credits

Heavy taxation in N.Y. can be cumbersome, but several state-specific tax credits help alleviate this burden by directly lowering overall tax liability. There’s a long list of New York tax credits which you may be eligible for, but we’ve gathered the most common ones claimed by taxpayers in the state.

  • Earned income credit (EIC) - if you have investment income of $3,100 or less, you can claim the NY EIC , equal to 30% of the federal EIC you claimed
  • New York child credit - taxpayers with an adjusted gross income (AGI) of $75,000 or less ($100,000 if married filing jointly) can claim this credit for qualifying children, which is 33% greater than the amount provided through the federal child credit
  • Child and dependent care credit - depending on your AGI, the tax credit you may receive for child or dependent care while you’re at work or school ranges from 20% to 110% of the federal credit
New York State Tax Exemptions and Deductions
New York Tax Exemptions

Certain sales and certain property are exempt from tax in New York, but some (or all) of your income may be exempt from taxation, as well. For example, government pension income from a local or state government in New York, the federal government, and some railroad pensions are exempt from income tax—although they count towards income at the federal level.

If you have dependents, you may be able to claim an exemption deduction of $1,000 for each dependent on your New York tax return, but you can not claim exemptions for you or your spouse.

New York Standard Deductions

In the state of New York, taxpayers are able to claim a standard deduction on their tax return that reduces a percentage of your overall tax liability. The standard deduction amounts as of 2018 are as follows:

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New York Itemized Deductions

If you prefer to claim itemized deductions over standard deductions, you may be able to claim the following expenses from your New York income tax return:

  • Medical and dental expenses - In N.Y., you can only deduct the portion of medical and dental expenses that exceeds 10% of your AGI (this is larger than the federal level, which allows you to claim the portion that exceed 7.5% of your AGI)
  • Taxes you paid - Unlike the federal deduction, there is no limit on the amount of state and local taxes (SALT) paid in 2018 that you can deduct from your New York tax return; you may also deduct the taxes you paid on foreign real estate.
  • Interest you paid - Changes were made that may affect how much home mortgage and home equity interest you may claim at a federal level, but these changes do not apply in New York.

This doesn’t exhaust the list of deductions you may be able to file on your New York state tax return. For the lowest possible tax bill and the highest possible return, ask about our tax preparation services.

Calculating Your New York Tax Refund

Make use of our free New York tax calculator to estimate how much your obligation to the state come tax season. You’ll need to input some basic information, such as your AGI, filing status, exemptions, and deductions. Here are some additional tips on N.Y. tax returns that you should bear in mind as you begin filing:

  • Self-employed individuals subject to the MCTMT must practice meticulous bookkeeping to properly allocate earnings.
  • NYC and Yonkers residents must remember to report their city income taxes on their New York state income tax return.
  • If you calculate New York taxes and find yourself unprepared to meet a financial obligation to a local, state, or federal collection agency—don’t panic. Living in the Big Apple is expensive, to say the least, but we offer tax relief help in New York so that you can take back control over your financials.
Fallen behind on state taxes? Get help with tax resolution today!

Note: After calculating New York taxes, you might be wondering what happened to the tax return you’re used to receiving. Verify that the information on your IRS Form W-2 is correct and make adjustments to your W-4 as necessary.

How to Pay New York Taxes

You have several options to pay your New York tax bill:

  • Free Online Service account
  • Pay directly from bank account

If you can’t pay your tax bill in full, you may be able to request an installment plan agreement from the state. Be sure to do this in a timely manner, otherwise you may risk incurring penalty interest and fees.

Note: You may be required to submit estimated tax payments on a quarterly basis if you receive certain types of income, such as self-employment income

New York Tax Facts
  • In NYC, property tax represented 44% of all of the city tax dollars collected in the 2018 fiscal year.
  • Many commuters live in New Jersey but work in New York; if so, they have to file Form IT-203, Nonresident and Part-Year Resident Income Tax Return.
  • The deadline to file taxes in New York is April 15, 2020.
Estimated Tax Payment Schedule
Summary of Federal Taxes

Remember: the taxes you owe to the state of New York are different from your federal income taxes. The New York tax brackets also vary from the federal tax code, as do the amount you can claim on qualifying tax credits and deductions.

Call us to strees less and save more on your federal tax refund.
Tax Considerations

This information is accurate as of 2019. Special circumstances which can affect your tax return may apply.

Summary of Federal Taxes
Remember that New York state taxes are separate from federal state taxes, and that the New York tax brackets are different at a state level.
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