The Nest

NestApple's Real Estate Blog

Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.

2023 Ultimate NYC Income Tax Guide

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Income tax is critical to living and working in New York City. Suppose you understand how it works when filing your taxes, and you can comply with the regulations and avoid unnecessary penalties. In this guide, you’ll learn the basics of the NYC income tax rate, including types of taxes.

Today, we’ll explore what it is, the rates and brackets for 2023, as well as deductions and available tax credits. NYC is among the few cities in the United States requiring individuals to pay a personal income tax on top of federal taxes. The NYC personal income tax is calculated and paid annually on your state income taxNYC Income Tax Guide return, and every income-earning individual living in NYC must bear it.

Who has to pay NYC income taxes?

New York State residents who work in New York City pay a personal income tax to the city. This tax is in addition to their current state and federal taxes. Your tax depends on how much money you make and which city tax rate applies to your income.

There are no standard deductions available.

New York City Income Tax and NYC Tax Brackets 2023

The city income tax applies to New York City’s residents and non-residents.

  • As a resident, you should pay the city income tax if your taxable income meets particular requirements.
  • For non-residents, the tax applies if you earn income from a job or business within the city.

The tax rate for city income tax ranges from 3.078% to 3.876%, depending on your income level. The tax calculation relies on your taxable income, including wages, salaries, tips, and bonuses.

New York City earned income tax rates are 3.078%, 3.762%, 3.819%, and 3.876%, depending on your bracket. Where you fall within these brackets depends on your filing status and how much you earn. Below are the NYC tax rates for Tax Year 2022, which you’ll pay on the tax return you file by April 2023.

1. Married Filing Jointly

  • less than $21,600 – 3.078%
  • between $21,600 and $45,000 – $665 plus 3.762% of the excess over $21,600
  • between $45,000 and $90,000 – $1,545 plus 3.819% of the excess over $45,000
  • over $90,000 – $3,264 plus 3.876% of the excess over $90,000

2. Single or Married Filing Separately

  • less than $12,000 – 3.078%
  • between $12,000 and $25,000 – $369 plus 3.762% of the excess over $12,000
  • between $25,000 and $50,000 – $858 plus 3.819% of the excess over $25,000
  • more than $50,000 – $1,813 plus 3.867% of the excess over $50,000

3. Head of Household

  • less than $14,400 – 3.078%
  • between $14,400 and $30,000 – $443 plus 3.762% of the excess over $14,400
  • between $30,000 and $60,000 – $858 plus 3.819% of the excess over $30,000
  • more than $60,000 – $2,176 plus 3.867% of the excess over $60,000

Any NYC Tax Deductions?

Unfortunately, there are no tax deductions specific to NYC income tax.

NYC calculates your income based on your net New York State taxable income after you claim any applicable state income-tax deductions.

NYC Income Tax Credits

There are no deductions available for personal income tax. Therefore, the best way to reduce the tax bill is to offset what you owe by deducting tax credits from your state income taxes. The following tax credits may help reduce the total taxes you pay.

  1. New York City School Tax Credit: available to NYC residents with a total household moderate income below $250,000. Individual taxpayers who cannot claim are eligible for a $63 credit, and those filing jointly would receive a $125 NYC school tax credit. To claim this credit, you cannot do it as dependent on another filer’s tax return.
  2. NYC Household Credit: If you cannot claim on another filer’s tax return, you are eligible for the New York City Household Credit of between $15 and $30.
  3. NYC Earned Income Credit equals 5% of your allowable federal earned income tax credit.
  4. NYC Child and Dependent Care Credit: NYC residents who paid qualifying child care expenses for a child under four years of age may be eligible for up to 75% of your NY State Dependent Care Credit. To qualify for the NYC Child and Dependent Care Credit, your household income cannot exceed $30,000.
  5. NYC Real Property Credit: available to renters and homeowners residing in a property not exempt from real property taxes. Total household income must be less than $200,000. The credit is for up to $500.

When and how must you file your NYC income taxes (e.g., online, by mail)?

Filing an income tax return in New York City is easy! The main thing you’ll need to know is when the deadline is: April 15th.

Don’t forget it may take up to 90 days for the NYS Tax Department to process your refund! You can file for free online at the NYS Tax Department website or by paper mail-in. Several tax preparation software programs are available to make filing your NYC taxes easier and check your refund status.

If you own a business in NYC, you must file returns with the city and the state – luckily, you only have to enter your info once, and both agencies will be provided with all the necessary details.

Unincorporated Business Tax

The business tax is taxable to individuals, partnerships, and limited liability companies (LLCs) conducting business in New York City. It’s based on your enterprise’s net income, calculated at a 4% rate for most corporations.

If you’re a sole proprietor or single-member LLC, you should pay the business tax if your business activities’ income in the city exceeds $95,000. For partnerships and multi-member LLCs, the tax applies if the business’s net income from activities in the town exceeds $95,000 and the enterprise’s allocated share of the partnership or LLC’s net income exceeds $25,000.

Can You Avoid NYC Income Tax?

As mentioned earlier, there are no deductions available for personal income tax. If you’ve already tried offsetting what you owe with state income tax credits, you’re out of options for further reducing your taxes. However, some loopholes could help you avoid paying personal income tax.

Part-year residents

The most significant and most apparent loophole is to live in the city for 182 days of the year or fewer. If you can manage this, you can save big on taxes. Since personal income taxes don’t applytax time to non-residents, living in the city for less than half the year means you won’t have to fork out the cash to cover personal income tax, even if you have a residence there.

The bad news is that unless you’re well-off or own two homes, this is difficult to achieve and impossible for most people.

Commute to work in the city.

The second option, and one which more and more people are choosing, is to live outside the city but commute to work daily. For example, you can avoid NYC income taxes if you live in New Jersey and commute to work in the city. And you can reach Manhattan in as little as thirty minutes from cities like Hoboken, Jersey City, or the many suburban towns in NJ.

You’re close enough to the city to visit and work but reap the benefits of cheaper housing, more space, and avoiding that pesky personal income tax. And you’re not limited to NJ and explore many great commuter towns in Connecticut and Long Island to save on your tax bill.

What happens if you don’t pay your NYC income taxes on time (e.g., interest and penalties)?

Every full year, New York City’s income tax contributes a percentage to the government. Residents who miss the deadline for filing their taxes or fail to pay what is due will pay interest and other penalties. The penalty for late payment is 5 percent of the amount due per month or partial month until paid in full, with an additional penalty of 0.5 percent for every additional month without payment.

Additionally, NYC charges interest on any unpaid amounts at a rate of 9 percent per year, compounded monthly. It is best to stay informed and pay your taxes on time to avoid these extra costs.

Work with a Reliable and Reputable Broker

Are you planning to purchase, sell, or rent property in New York City? It’s best to work with a reliable real estate broker to avoid common pitfalls. At Nestapple, we’re here to help you with the process for a stress-free transaction. Contact us today for more information.

Written By: Georges Benoliel

Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.

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