New York Allows Itemized Deductions, Decoupling from Federal Tax Changes

New York will let taxpayers itemize deductions on income tax returns, differing from federal tax treatment in several areas.

The Department of Taxation issued a technical memorandum explaining that, as of 2018, New York will not conform certain personal income tax Internal Revenue Code changes that were made by the TCJA.

Itemized Deductions

Taxpayers are permitted to itemize their deductions for New York State income tax purposes for tax years 2018 and after, even if they did not itemize it on their federal income tax return. Since New York has opted not to follow the changes made by the TCJA, taxpayers may claim deductions on their New York personal income tax returns which they are otherwise not permitted to claim for federal income tax purposes. For example, taxpayers can claim deductions for:

  • state and local real estate taxes paid, including amounts over the $10,000 federal limit;
  • casualty and theft losses including those incurred outside a federally declared disaster area;
  • unreimbursed employee business expenses; and
  • certain other miscellaneous deductions that taxpayers are no longer allowed to claim federally (e.g., tax preparation fees, investment expenses, and safe deposit box fees).

Alimony or Separate Maintenance Payments

New York opted not to follow changes made by the TCJA to the treatment of alimony or separate maintenance payments made under an alimony or separation agreement that was executed or modified after December 31, 2018. Taxpayers, when calculating their New York adjusted gross income (NYAGI), are required to:

  1. subtract from their federal adjusted gross income (FAGI) any applicable alimony or separate maintenance payments they made in a tax year, and
  2. add to FAGI any applicable alimony or separate maintenance payments they received in the tax year.

Qualified Moving Expenses Reimbursement and Moving Expenses

New York opted not to follow changes made by the TCJA to the deduction for moving expenses and to the exclusion from gross income (wages) for moving expenses reimbursement for tax years 2018 through 2025. Further, New York will continue to allow taxpayers to exclude qualified moving expenses reimbursement and moving expenses from their NYAGI.

Empire State Child Tax Credit

For computing the Empire State child tax credit for New York, taxpayers are not permitted to use their current tax year’s federal child tax credit or additional child tax credit. Instead, the credit will now be based on the 2017 federal credits and income.

529 College Savings Account

New York opted not to follow changes made by the TCJA to the types of withdrawals that are allowed from a Qualified Tuition Program (QTP) account. Accordingly, the withdrawals for kindergarten through 12th grade school tuition are not qualified withdrawals under the New York 529 college savings account program. Further, withdrawals dispersed in cash or in kind, from college saving accounts and not used for the higher education of the designated beneficiary are considered nonqualified withdrawals.

TSB-M-18(6)I, New York Department of Taxation and Finance, December 28, 2018, ¶409-393

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CCHTaxGroup

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