New York, land of itemized deductions

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Posted by Evan Piccirillo, CPA

As we discussed previously, under the Tax Cuts and Jobs Act (TCJA), most itemized deductions have been suspended or limited for the next eight years. That fact, coupled with the nearly doubled standard deduction, means that most taxpayers will no longer itemize deductions on their federal tax return. Many might be led to infer that we no longer need to gather receipts and other tax deduction documents like we had in the past. You might even be thinking “Finally, something in the TCJA that resembles the simplification that the term ‘tax reform’ would suggest.”

Not so fast… New York State threw us a curve ball.

Prior to 2018, in most cases if taxpayers took the standard deduction on their federal return, then they would have to use the standard deduction on their New York return. Now New York will allow all taxpayers to itemize, even if they take the standard on their federal. In addition, virtually all the categories of itemized deductions that were suspended under the TCJA for federal returns are still allowable for New York returns. This means you will have to provide your tax preparer with:

  • amounts paid for charity

  • personal casualty losses

  • real estate and foreign taxes paid (you still can’t deduct New York taxes on your New York return)

  • interest paid, including mortgage interest

  • medical expenses, if they exceed 10% of federal AGI

  • certain job expenses and other miscellaneous itemized deduction, subject to limits

Many of these deductions are subject to limits for New York that differ from federal limits.  Also, keep in mind that the New York standard deduction is only $16,050 for a married couple while the federal standard deduction is $24,000.  It very well may be the case that taxpayers with itemized deductions that fall between those amounts (and in excess of those amounts) will want to tax advantage of this change in New York.

Although this is actually a benefit for taxpayers (more deductions) it adds yet another layer of complexity to an already tangled web of information and misinformation in the public conversation.  If you were under the impression that your facts lined up in such a way that you were done with tracking personal deductions, it is very likely that you were wrong.

I hope you didn’t throw away those receipts…