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Onvio "how to" videosYear End Tax Tips for New Yorkers
By now most of you are aware that the new federal tax law has limited the state income tax and real estate tax deduction to $10,000 as part of itemized deductions. With the increase in the standard deduction, most people will claim the standard deduction for federal income tax in 2018. New York’s tax law used to require that if you took the standard deduction for federal purposes, then you had to take the New York State (NYS) standard deduction for state purposes. Given the federal tax law change, that would severely impact people who have high state income and real property taxes.
Fortunately, NYS came through and de-coupled state income tax law from federal income tax law and now we can itemize deductions for NYS even if we take the standard deduction on the federal tax return.
When I was asked earlier in the year if a person needed to provide the same tax documents submitted in previous years, I would say only if you have very high unreimbursed medical and dental expenses or higher than normal charitable contributions. That suggestion has changed. You will still need to provide the same tax documents to your tax preparer as you would have done in previous years.
What other differences are there with New York versus Federal itemized deductions? First, there is no $10,000 cap on real property taxes for New York tax returns. Miscellanous itemized deductions, such as employee business expenses and investment expenses, which are eliminated for federal purposes still exist for NYS. Moving expenses that have been eliminated federally are still deductible for NYS.
A strategy to make use of the federal tax law change may be to hold off paying donations now and “accumulate” your normal charitable donations of the next few years and pay it all in a future tax year, so you can itemize your deductions. If you have been holding out on sending donations to your favorite charities before year end, you might consider choosing to do as you would have done in previous years. It will make a positive impact by reducing your state income tax liability and I am sure the charity will appreciate your continued support.
Other things you can do to save on taxes is to increase your contributions to retirement plans which will reduce both federal and NYS taxes. If you make contributions to NYS 529 education plans it will decrease your state income taxes.
Most people thought the new tax law would make things simpler going forward. Ha! That is definitely not the case! For business owners, the complexity has increased substantially with the new “pass through deduction.” Individuals itemizing deductions will need to compile and submit the same tax documentation needed in previous years to their tax professional. New York State income taxes should be similar to what you experienced in previous years. Federal taxes, on the other hand, will likely be much different.