As one of the most populous states and cities in the United States, New York State and New York City have some of the highest income tax rates in the country. It's important for residents and those considering moving to the state or city to understand the income tax system to effectively manage their finances, in addition to federal income tax obligations.
This guide provides an overview of New York State and New York City income taxes, including tax brackets and an introduction to income tax credits that residents may be eligible for.
New York State Income Tax Brackets
New York State has a progressive income tax system, which means that the more income you earn, the higher your tax rate. There are currently nine tax brackets in New York State, with rates ranging from 4% to 10.9% for the 2022 tax year, that vary based on filing status.
Single or Married Filing Separately
Income of $8,500 or less: 4.00%
Income of $8,501 to $11,700: $340 plus 4.5% of excess over $8,500
Income of $11,701 to $13,900: $484 plus 5.25% of excess over $11,700
Income of $13,901 to $80,650: $600 plus 5.85% of excess over $13,900
Income of $80,651 to $215,400: $4,504 plus 6.25% of excess over $80,650
Income of $215,401 to $1,077,550: $12,926 plus 6.85% of excess over $215,400
Income of $1,077,551 to $25,000,000: $71,984 plus 9.65% of excess over $1,077,551
Income of $5,000,001 to $25,000,000: $450,500 plus 10.3% of excess over $5,000,000
Income of $25,000,000 or greater: $2,510,500 plus 10.9% of excess over $25,000,000
Married Filing Jointly
Income of $17,150 or less: 4.00%
Income of $17,151 to $23,600: $686 plus 4.5% of excess over $17,150
Income of $23,601 to $27,900: $976 plus 5.25% of excess over $23,600
Income of $27,901 to $161,550: $1,202 plus 5.85% of excess over $27,900
Income of $161,551 to $323,200: $9,021 plus 6.25% of excess over $161,550
Income of $323,200 to $2,155,350: $19,124 plus 6.85% of excess over $323,200
Income of $2,155,351 to $5,000,000: $144,626 plus 9.65% of excess over $2,155,350
Income of $5,000,001 to $25,000,000: $419,135 plus 10.3% of excess over $5,000,000
Income of $25,000,000 or greater: $2,479,135 plus 10.9% of excess over $25,000,000
Head of Household
Income of $12,800 or less: 4.00%
Income of $12,801 to $17,650: $512 plus 4.5% of excess over $12,800
Income of $17,651 to $20,900: $730 plus 5.25% of excess over $17,650
Income of $20,901 to $107,650: $901 plus 5.85% of excess over $20,900
Income of $107,651 to $269,300: $5,976 plus 6.25% of excess over $107,650
Income of $269,301 to $1,616,450: $16,079 plus 6.85% of excess over $269,300
Income of $1,616451 to $5,000,000: $108359 plus 9.65% of excess over $1,616,450
Income of $5,000,001 to $25,000,000: $434,871 plus 10.3% of excess over $5,000,000
Income of $25,000,000 or greater: $2,494,871 plus 10.9% of excess over $25,000,000
It's important to note that New York State income tax rates apply to both earned income (such as wages, salaries, and tips) and unearned income (such as interest, dividends, and capital gains). Additionally, New York State does not allow itemized deductions.
Instead, taxpayers can claim a standard deduction based on their filing status:
Single: $8,700
Married filing separately: $8.700
Married filing jointly: $17,400
Head of household: $14,850
NYC Income Tax Brackets
In addition to New York State income taxes, residents of New York City are also subject to New York City income taxes. Like New York State, New York City has a progressive income tax system.
The amount of income tax New Yorkers pay is determined by their filing status and yearly earnings. There are four different tax brackets for the city with varying rates for the 2022 tax year, ranging from 3.078% to 3.876%. All tax returns for this period must be filed by April 15, 2023.
Single or Married Filing Separately
Income of $12,000 or less: 3.078%
Income of $12,000 to $25,000: $369 plus 3.762% of excess over $12,000
Income of $25,000 and $50,000: $858 plus 3.819% of excess over $25,000
Income of $50,000 of greater: $1,813 plus 3.867% of excess over $50,000
Married Filing Jointly
Income of $12,600 or less: 3.078%
Income of $21,600 to $45,000: $665 plus 3.762% of excess over $21,600
Income of $45,000 and $90,000: $1,545 plus 3.819% of excess over $45,000
Income of $90,000 of greater: $3,264 plus 3.867% of excess over $90,000
Head of Household
Income of $14,400 or less: 3.078%
Income of $14,400 to $30,000: $443 plus 3.762% of excess over $14,400
Income of $30,000 and $60,000: $858 plus 3.819% of excess over $30,000
Income of $60,000 of greater: $2,176 plus 3.867% of excess over $60,000
It's worth noting that New York City income tax rates apply only to earned income, not unearned income. Additionally, New York City does allow itemized deductions, but the deduction is limited to $10,000 for state and local taxes (SALT). This limit was implemented as part of the Tax Cuts and Jobs Act (TCJA) of 2017 and applies to all taxpayers in the United States.
Can NYC income tax be avoided?
It is not legal to completely avoid paying New York City income tax if you are a resident of the city and earn taxable income. However, there are certain strategies that taxpayers can use to reduce their New York City income tax liability:
- Change your residency: If you move out of New York City and establish residency in another state or jurisdiction, like New Jersey or Connecticut, you may no longer be subject to New York City income tax. However, this strategy can be complicated and requires careful planning to ensure that you are in compliance with all tax laws.
- Use tax deductions and credits: Taxpayers can reduce their New York City income tax liability by taking advantage of available deductions and credits. (More information on income tax credits below)
- Contribute to a retirement plan: Contributions to a qualified retirement plan, such as an IRA or 401(k), can be deducted from taxable income, reducing a taxpayer's New York City income tax liability.
- Take advantage of tax-deferred investments: Tax-deferred investments, such as annuities or certain types of bonds, can help reduce a taxpayer's current income tax liability, although they may result in higher taxes in the future when the funds are withdrawn.
- Work remotely: If you work for an employer based outside of New York City and can work remotely, you may be able to avoid New York City income tax on your wages. However, this strategy depends on the specific circ*mstances of your employment and may not be applicable to all taxpayers.
It's important to note that attempting to evade or avoid paying New York City income tax can result in serious consequences, including fines, penalties, and legal action. Taxpayers should consult with a tax professional or accountant to determine the best strategies for reducing their New York City income tax liability while remaining in compliance with all tax laws.
Income Tax Credits in NYC
There are several income tax credits available to New York City residents that can help lower their tax liability.
Here are some of the most common tax credits in NYC:
- Child and Dependent Care Credit:This credit is available to taxpayers who have paid for child or dependent care so they can work or look for work. The credit is calculated as a percentage of the amount spent on care, up to $6,000 for two or more dependents.
- School Tax Credit: This credit is available to taxpayers who pay school taxes on their primary residence in New York City. The credit is calculated as a percentage of the school tax paid, up to $375 for taxpayers with a household income of $250,000 or less.
- Earned Income Tax Credit (EITC): This credit is available to low- to moderate-income taxpayers who work and have earned income. The credit is based on income, filing status, and can total up to $11,000 for eligible taxpayers.
- Household Credit:This credit is available to taxpayers with a household income of $200,000 or less who pay rent or own their home in New York City. The credit is calculated based on household income and can be up to $1,000.
- Senior Citizen Homeowners' Exemption Credit: This credit is available to senior citizens who own their home and have a household income of $58,400 or less. The credit is based on the amount of property taxes paid and can be up to $1,000.
- Volunteer Firefighters and Ambulance Workers Credit: This credit is available to volunteer firefighters and ambulance workers who meet certain eligibility requirements. The credit is calculated based on the number of months the taxpayer served as a volunteer during the tax year and can be up to $200.
- Unincorporated Business Tax Credit: This credit is available to taxpayers who have a business that is not incorporated and is subject to the Unincorporated Business Tax (UBT). The credit is based on the amount of UBT paid and can be up to $250.
Eligibility requirements and credit amounts may vary from year to year, and taxpayers should consult the New York Department ofTaxation and Finance or a tax professional for the most up-to-date information on available tax credits.
DISCLAIMER: This material was provided for informational purposes only, and is neither intended to provide, nor should be relied upon as tax, legal, or accounting advice. Prevu and its subsidiaries do not provide tax, legal, or accounting advice. You are encouraged to consult your personal tax, legal, or accounting professionals as your individual situation may vary.
