New York Decouples from Some Federal Tax Law Changes

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Income reported on a New York State individual income tax return is based on a taxpayer's federal income, and follows most of the same rules that apply federally. While most of the new 2018 federal Tax Cuts and Jobs Act (TCJA) statutes also affect state returns, New York has opted not to follow all of the law's changes. On December 28, the New York Department of Taxation and Finance issued a memorandum highlighting areas where New York's tax treatment of certain income and deductions differs from federal law.

 

Itemized deductions

TCJA's greater standard deduction and limitation or repeal of some itemized deductions means fewer taxpayers will itemize deductions on 2018 federal tax returns. Previously, this meant they also could not itemize deductions in New York. But New York did not follow many of TCJA's itemized deduction changes and now lets taxpayers itemize on their New York return regardless of whether they did so on the federal return. The following deductions disallowed by the IRS may still be claimed in New York: 

 

  • state and local real estate taxes, including amounts over the $10,000 federal limit
  • casualty and theft losses, even if incurred outside a federally declared disaster area
  • unreimbursed employee business expenses
  • tax preparation fees, investment expenses, safe deposit box fees, and other miscellaneous deductions no longer allowed federally

 

529 college savings account

TCJA allows withdrawals from IRC §529 Qualified Tuition Program for kindergarten through 12th grade school tuition payments (previously permitted only for higher education) (LMC TCJA Tax Alert #11). New York opted not to follow this change and continues to recognize only withdrawals used to attend post-secondary educational institutions. Distributions used to pay for tuition at an elementary or secondary school are nonqualified withdrawals for New York purposes and will require the recapture of any New York State tax benefits that have accrued on contributions.

 

Alimony or separate maintenance payments

Under TCJA, an alimony or separate maintenance payment made under an agreement executed or modified after December 31, 2018, is no longer deducted by the spouse making the payment nor included in the income of the spouse receiving it (LMC TCJA Tax Alert #17). New York opted not to follow these federal changes. Applicable payments must be subtracted from (or added to) federal income when New York taxpayers calculate their state income.

 

Qualified moving expenses reimbursement and moving expenses

New York also opted not to follow TCJA changes to the deduction for moving expenses and to the exclusion from income for reimbursed moving expenses. New York will continue to allow taxpayers to deduct moving expenses and exclude qualified moving expenses reimbursement as income on their state returns.

 

Contact your LM Cohen professional if you have questions about the impact of TCJA on your New York return. All our prior Tax Cuts and Jobs Act Alerts are available on the Updates page of our website.

 

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