New York State after the TCJA (New Tax Law)
The new tax law known as the Tax Cuts and Jobs Act (TCJA) made changes to federal income taxes that we have written about throughout this past year.
New York State, however, has decided not to follow all the changes in the TCJA. Since New York and the IRS are playing by different rules, there are a few pieces of information that your CPA will need to prepare your New York State return even though you thought the federal changes made them obsolete.
Alimony – the TCJA says that if you sign a divorce or separation agreement after December 31, 2018, alimony payments are not deductible by the payor and are not included in income of the payee. All alimony payments under agreements finalized prior to that date will still be deductible on the tax return of the spouse who paid alimony, and reported as income on the return of the spouse who received the alimony.
On your New York return, ALL alimony payments are deductible by the payor and are included in income of the payee.
529 Plan distributions for K-12 tuition – the TCJA allowed 529 Plan distributions to be used towards Kindergarten through twelfth grade private school tuition without tax or penalty.
On your New York return, all 529 distributions that are used for K-12 tuition are considered non-qualified distributions and will be subject to both income tax and a 10% penalty.
Itemized Deductions – the TCJA removed itemized deductions for unreimbursed business expenses, lowered the threshold for medical expenses to 7.5% of AGI and limited the deductions for state and local income and real estate taxes to $10,000.
On your New York return, you will now be allowed to itemize your deductions even if you claim the standard deduction on your federal return.
New York State itemized deduction for real estate taxes will not be limited, so if you paid $15,000 in property tax in 2018 you can deduct the full $15,000.
Since New York is not following the TCJA, the threshold for medical expense deductions on the State return is still 10%.
New York will allow miscellaneous deductions in excess of the 2% floor as in past years.
Honorine M. Campisi, CPA