New York State Credits

Question 1

New York State Taxable Income is:

Answer 1

Federal Adjusted Gross Income (FAGI)
Plus New York additions
Minus New York subtractions
Minus standard deduction or itemized deduction
Minus dependent exemptions

Question 2

How is your New York state tax rate determined

Answer 2

by their New York Adjusted Gross Income (NY AGI) and filing status.

Question 3

NYS Household Credit

Taxpayers are entitled to this nonrefundable credit if they:

Answer 3

a. cannot be claimed as a dependent on another individual’s federal income tax return; and
b. meet one of the conditions in the following tables.

Note: Taxpayers must claim this credit directly on their income tax return. If you use software, it will automatically calculate the NYS Household Credit.

Question 4

New York State Household Credit tables

Question 5

New York State Household Credit tables (Continued)

Table Notes: The number of exemptions claimed on the taxpayer’s NYS return, plus one for the taxpayer and one for the spouse (if married filing joint).

Question 6

New York State Household Credit tables (Continued)

Table Notes: *Federal AGI total from both returns

The number of exemptions claimed on the taxpayer’s NYS return plus one for the taxpayer and one for the spouse (if married filing joint on the federal return)

Question 7

Here are several examples of where you might encounter the
Household Credit.

Answer 7

Example 1: Joe

Joe just finished his first year at his full-time job and filed his New York State income tax return, Form IT-201, Resident Income Tax Return. He claimed a total refund of $200, including a $40 household credit. His FAGI is $21,675. Joe didn’t realize his parents are still claiming him on their return.

Joe will receive an adjusted refund for $160. The $40 household credit will be disallowed.

The Tax Department will send Joe a notice that states:

We disallowed the New York State household credit because you have been claimed as a dependent on another individual’s federal income tax return. Therefore, you are ineligible for the household credit.

Question 8

Here are several examples of where you might encounter the
Household Credit. (continued)

Answer 8

Example 2: Suzy and Tom

Suzy and Tom filed jointly on their New York State income tax return, Form IT-201 Resident Income Tax Return. They claimed a total refund of $300, including an $80 household credit. Their FAGI is $28,000. They have two dependent children.

Suzy and Tom will receive an adjusted refund for $275 because the household credit will be reduced.

The Tax Department will send Suzy and Tom a notice that states:

We reduced the New York State household credit from $80 to $55 because your FAGI is $28,000 and you have four exemptions. This allows a $55 household credit.

Question 9

Here are several examples of where you might encounter the
Household Credit. (continued)

Answer 9

Example 3: Deanna and Robert

Deanna and Robert filed jointly on their New York State income tax return, Form IT-201, Resident Income Tax Return. They claimed a $200 refund, including a $60 household credit. Their FAGI is $19,185. They do not have dependent children.

Deanna and Robert will receive an adjusted refund that is $15 more than expected.

The Tax Department will send Deanna and Robert a notice that states:

We increased the New York State household credit from $60 to $75 because your FAGI is not over $20,000 and you have two exemptions. An exemption is allowed for each spouse. This allows a $75 household credit.

Question 10

Knowledge Check 1

New York Adjusted Gross Income (NY AGI) is Federal Adjusted Gross Income (FAGI) plus and minus applicable modifications:

True or False

Answer 10

Answer: True

Question 11

Knowledge Check 2

Taxpayers can claim the Household credit if they are a dependent on another individual’s federal income tax return:

True or False

Answer 11

Answer: False

Question 12

Knowledge Check 3

The NYS household credit is nonrefundable:

True or False

Answer 12

Answer: True

Question 13

What is the the purpose of the resident credit ?

Answer 13

The purpose of the resident credit is to reduce the impact of double taxation on New York State residents.

Question 14

Who is eligible to receive the Resident Credit?

Answer 14

You are entitled to claim this nonrefundable credit if:

• you were a full-year or part-year resident of New York State, or a New York State resident estate or trust, or a part-year resident trust; and
• you had income sourced to and taxed by another state, a local government within another state, the District of Columbia, or a Canadian province. (This income generally includes wages, business income, etc. It typically excludes interest, dividends, gambling winnings, lottery winnings, etc.)
• you were a shareholder of an S corporation and you pay the tax calculated on the S corporation income.

If you have dual residency status

If you are a resident of New York State and another state or Canadian province for income tax purposes, you cannot claim a credit if the other jurisdiction allows a credit against its tax for the total resident tax paid to New York

Question 15

Resident Credit

What are the four elements that a taxpayer must prove to claim the credit:

Answer 15

1. The income was subject to tax by another jurisdiction;
2. the income was derived from the other jurisdiction*;
3. the income was subject to tax under Article 22; and
4. a return was filed, or is being filed, with the other state.

*Intangible income (interest, dividends, gambling winnings, lottery winnings, certain capital gains, etc.) is not considered derived from the other state, unless it is received from an asset connected with a trade or business conducted in the other taxing authority.

Matter of Jane A. Mallinckodt, DTA No. 807533

Question 16

There are four elements that you must prove for the taxpayer to claim the credit

What is Element Number 1?

Answer 16

1. The income was taxed by another jurisdiction.

Use Form IT-112-R, New York State Resident Credit, and its instructions to calculate this credit if the income was taxed by:

• another state;
• a local government of another state; or
• the District of Columbia.

Use Form IT-112-C, New York State Resident Credit for Taxes Paid to a Province of Canada, and its instructions to calculate this credit if the income was taxed by a Canadian province.

Question 17

There are four elements that you must prove for the taxpayer to claim the credit

What is Element Number 2?

Answer 17

2. The income was derived from another jurisdiction

The income taxed by the other state or city must be derived from that jurisdiction using New York’s sourcing rules for nonresidents.

Types of income that a nonresident of New York can include:

• wages;
• business income; and
• real property, etc.

It is these same items of income for which a resident would be allowed the credit.

• Tax Law section 631
• NYCRR 120.4(d)

Question 18

There are four elements that you must prove for the taxpayer to claim the credit

What is Element Number 3?

Answer 18

3. The income was subject to tax under Article 22

Since a New York resident is generally taxed on all income regardless of source, it will most likely satisfy this condition. The same income may be subject to New York corporation tax, estate tax, or any other article of tax, and the law may not provide the taxpayer with relief.

Question 19

There are four elements that you must prove for the taxpayer to claim the credit

What is Element Number 4?

Answer 19

4. A return was filed, or is being filed with the other state.

Enter the state and locality name (if applicable) on Form IT-112R where the tax was paid.

Question 20

Resident Credit Limitations

To determine that the income taxed by the other jurisdiction qualifies for the resident credit, a preparer should:

Answer 20

• ask qualifying questions, and
• see qualifying documentation.

Question 21

Resident Credit Limitations

The amount allowable is subject to several limitations, including the following:

Answer 21

• The credit for the taxable year cannot exceed the total of income taxes payable to the other jurisdictions.
• The credit cannot exceed taxes paid to New York State or be carried over to future years.
• The credit can be claimed only against New York State taxes, not NYC resident taxes.
• The credit can be claimed only for liabilities to another jurisdiction in the same taxable year.

Question 22

What are Dual Residents in respect to the Resident Credit?

Answer 22

Resident Credit – Dual Residents

Taxpayers who are residents of another state and are also determined to be New York State residents, because of either domicile or statutory residency, are subject to an additional limitation.

We call these individuals dual residents

Example:

A domiciliary of New Jersey is determined to be a statutory resident of New York. This taxpayer is deemed to be a resident in both New York and New Jersey.

For a resident of New York State, and another state or Canadian province. The resident credit is not allowed if the other jurisdiction allows a credit against its tax for the total resident tax paid to New York.

The credit is not allowed twice.

Question 23

What is the defo of Domicile?

Answer 23

In general, your domicile is:

• the place you intend to have as your permanent home
• where your permanent home is located
• the place you intend to return to after being away (as on vacation, business assignments, educational leave, or military assignment)

Question 24

What is the defo of a New York State Resident.

Answer 24

Definition of New York State resident The definition of resident individual for New York State income tax purposes has been clarified for tax years 2019 and after to state that an individual who maintains a permanent place of abode in New York State and spends more than 183 days of the tax year in New York State, whether or not they are domiciled in this state, is a resident unless they were in active service in the military.

Previously, a resident individual was defined as an individual who is not domiciled in New York State but maintains a permanent place of abode in the state and spends more than 183 days of the tax year in New York State, unless they were in active service in the military. The same clarification has been made to the definition of resident individual for New York City income tax purposes

Question 25

Resident Credit – Dual Residents

Since the income includes items for which a resident credit would normally not be allowed, such as interest and dividends, you must prorate the tax paid to the other state, in this case New Jersey, by the following formula:

Answer 25

Income sourced to and tax by NJ X Total Tax Due NJ

Total Income on NJ Return

It is this adjusted figure, and not the tax actually computed on the New Jersey return, that you enter on Form IT-112-R.

This computation is complicated. Please see the IT-112-R instructions to calculate this dual resident credit.

Question 26

Resident Credit –S Corp Shareholder

Is a shareholder of a Subchapter S corpallowed a resident credit for income tax imposed upon or payable by the corporation to another jurisdiction

Answer 26

Answer: No

• A shareholder of a Subchapter S corporation is not allowed a resident credit for any income tax imposed upon or payable by the corporation to another jurisdiction (because the income is not subject to tax under Article 22).

Question 27

Resident Credit –S Corp Shareholder (Continued)

When is a shareholder allowed a resident credit

Answer 27

• However, a shareholder is allowed a resident credit if taxes are calculated on the income of the S corporation, but are imposed upon and paid by the shareholder.

Question 28

Resident Credit examples

Example 1

Answer 28

Charles, a full year resident of New York State, works in New Jersey.

His NYS Form IT-201 shows income of $60,000. $50,000 of which was earned at his job in New Jersey. As a resident of New York, Charles is taxable on ALL income earned, regardless of the source.

He computed New York State tax of $4,000. His New Jersey tax is $3,000.

Question

What is his Resident Tax Credit?

Answer

$50,000 (amount taxable to NJ) X $4,000 = $3,333 (resident credit computed)
$60,000 (amount taxable to NY)

However, the answer is $3,000, as it is limited to the tax paid to New Jersey.

Question 29

Resident Credit examples

Example 2

Answer 29

Example 2

Assume the same facts as Example 1 but his New Jersey tax is computed as $3,500.

Question

What would the allowable resident tax credit be?

Answer

$50,000 (amount taxable to NJ) X $4,000 = $3,333 (resident credit computed)
$60,000 (amount taxable to NY)

The answer is $3,333 because the NY resident credit is limited to the lower of tax paid to New Jersey or computed amount which is lower in this example.

Example 2

Assume the same facts as Example 1 but his New Jersey tax is computed as $3,500.

Question

What would the allowable resident tax credit be?

Answer

$50,000 (amount taxable to NJ) X $4,000 = $3,333 (resident credit computed)
$60,000 (amount taxable to NY)

The answer is $3,333 because the NY resident credit is limited to the lower of tax paid to New Jersey or computed amount which is lower in this example.

Question 30

Resident Credit examples

Example 3

Answer 30

Example 3

Now assume the following about Charles:

The tax paid to New Jersey is $4,500.

The resident tax credit is calculated as $5,000.

New York State tax computed on his tax return is $4,000 and New York City tax is $2,000.

Question

What is the maximum tax credit allowed?

Answer

Up to $4,000. It is limited to the lesser of the tax paid to New Jersey or the computed amount, which would be $4,500 (tax paid to New Jersey). However, the resident tax credit is not refundable and cannot be claimed against New York City tax ($2,000).

Question 31

KNOWLEDGE CHECK- Section Two

1. Which form is used to claim the New York State resident credit?
2. Form IT-112-R
3. Form IT-112-C
4. Both a) and b)
5. None of the above

Answer 31

Answer:

3. Both a) and b)

Question 32

KNOWLEDGE CHECK- Section Two (Continued)

2. Dual residents are taxpayers who are:
   - residents of another state, and
   - determined to be New York State residents, either because of domicile or statutory residency.

True or False

Answer 32

Answer: True

Question 33

The four elements you must prove for the tax payer to claim the resident credit are

1. The income was subject to tax by another jurisdiction;
2. the income was derived from the other jurisdiction*;
3. the income was subject to tax under Article 9A; and
4. a return was filed, or is being filed, with the other state.

Answer 33

Answer: False

It’s Article 22 not 9A

Question 34

Other Tax Credit and Taxes

College Tuition Credit or Itemized Deduction

What are the Eligibility Requirements?

Answer 34

• A full-year NYS resident may claim either the college tuition credit or the itemized deduction.
• A nonresident may only claim the New York itemized deduction.

The primary taxpayer, the spouse or dependents claimed were undergraduate students enrolled at or who attended an institution of higher education and paid qualified tuition expenses.

If the student is not claimed as a dependent on another person’s tax return, the student may claim the credit or deduction.

Eligible taxpayers may claim either the credit or the deduction, but not both.

If the credit exceeds their tax for the tax year, the excess credit will be refunded, without interest.

Question 35

College Tuition Credit or Itemized Deduction

When does the college tuition itemized deduction offer a greater tax savings for the tax payer?

Answer 35

The college tuition itemized deduction may offer a greater tax savings for your client when they itemize their deductions.

Use the worksheets in the instructions to compute the deduction to determine if the credit or the deduction offers the biggest savings.

Question 36

College Tuition Credit or Itemized Deduction

a. What is tuition credit Maximum?

b. What is tuition itemized deduction maximum?

c. What are the qualified tuition expenses?

Answer 36

College tuition credit maximum: $400 per eligible student.

College tuition itemized deduction maximum: $10,000 per eligible student

Qualified tuition expenses include:

• tuition required for the enrollment or attendance of the eligible student at an institution of higher education.
• expenses may be paid by cash, check, credit card or with borrowed funds.
• the eligible student does not need to be enrolled in a degree program or attend full time for the expenses to qualify.
• only tuition paid for the undergraduate enrollment or attendance of the student at an institution of higher education.

Question 37

College Tuition Credit or Itemized Deduction

Qualified tuition expenses do not include:

Answer 37

• tuition paid through scholarships or other financial aid that need not be repaid
• amounts paid for room and board, and other similar personal or living expenses, and
• amounts paid for books, equipment, and activities, even if required by the school.

Question 38

College Tuition Credit or Itemized Deduction Form

These forms are:

Answer 38

Form IT-272 Claim for College Tuition Credit or Itemized Deduction, and its instructions.

Form IT-201-D Resident Itemized Deduction Schedule and its instructions.

Form IT-203-B Nonresident and Part-Year Resident Income Allocation And College Tuition Itemized Deduction* *Worksheet and its instructions.

Question 39

Other NYS credits found on Form IT-201-ATT

Answer 39

Accumulation distribution credit

May be allowed when taxpayers receive an accumulation distribution as a beneficiary of a trust when a trust has already paid NYS taxes in a prior year, or years.

Long-term care insurance credit

Allowed for 20% of premiums paid by a taxpayer or their business.

Investment tax Credit (ITC)

A percentage of the investment credit base (the cost or other basis of the investment property).

Solar energy system equipment credit

Equals 25% of the qualified solar energy system equipment expenditures used at the taxpayer’s principal residence in NYS limited to $5,000.

Farmers school tax credit

Must be engaged in the business of farming and have paid school district property taxes on qualified agricultural property. Credit based on qualified acres and school district property taxes paid for the year.

Question 40

• *Other NYS credits found on**
• *Form IT-201-ATT**

Claim of Right Credit

Answer 40

• New York State, New York City, or Yonkers tax, or metropolitan commuter transportation mobility tax (MCTMT) paid on claim of right income.
• Claim of right income is income that was reported on a prior year’s tax return but was repaid because the income was paid to the taxpayer in error.
• A federal claim of right credit must be claimed on the federal return.
• If a federal deduction is taken instead of the federal credit, a credit cannot be claimed for New York State, New York City, Yonkers, or MCTMT. See Form IT-257, Claim of Right Credit and Federal Publication 525 under Repayments.

Question 41

What is The Claim of Right Credit and Who is Eligible?

Answer 41

You are entitled to this refundable credit if:

• You paid New York State, New York City, or Yonkers tax, or metropolitan commuter transportation mobility tax (MCTMT) on claim of right income. Claim of right income is income that you reported on a prior year’s tax return, but had to repay because the income was paid to you in error.
• You are taking a federal claim of right credit on your federal return. (If you are taking the federal deduction instead of the federal credit, you cannot claim a credit for New York State, New York City, Yonkers, or MCTMT.)

How much is the credit?

The credit amount is the difference between the New York State, New York City, or Yonkers tax, or MCTMT you paid on the prior year’s return, and the tax that you would have paid if you hadn’t included the claim of right income on that return.

Question 42

Other non-refundable, carryover credits

Residential fuel oil storage tank credit carryover-

What form do you report it on?

If you are using credit from last year, what must you do?

Answer 42

There is no form for computing the residential fuel oil storage tank carryover. If you are using any unused credit from last year, you must submit a schedule showing how you computed the amount being used. Enter the amount and code 054 on Form IT-201-ATT.

Question 43

Other non-refundable, carryover credits

Solar and wind energy credit carryover-

Is there a form for computing the solar and wind energy credit carryover?

What must you do if using any unused credit from last year?

Answer 43

There is no form for computing the solar and wind energy credit carryover. If you are using any unused credit from last year, you must submit a schedule showing how you computed the amount being used. Enter the amount and code 052 on Form IT-201-ATT.

Question 44

Other non-refundable, carryover credits

Answer 44

• New York City non-refundable, non-carryover credits IT-201-ATT Section C
• New York City unincorporated business tax (UBT) credit must be owner of a business, beneficiary of an estate or trust, or partner in a partnership subject to the NYC UBT Form IT-219, Credit for New York City Unincorporated Business Tax,andInstructions.
• New York City general corporation tax credit
  
  • Must be full-year NYC resident.
  • 100% credit for taxable income below $35,000.
  • Reduced gradually to 0% when taxable income exceeds $100,000.
  • See Form IT-222, General Corporation Tax* *Credit for Full-Year New York City Resident Individuals,* *and Trusts.

Answer 45

Form IT-201-ATT

Form IT-230, Separate tax on lump-sum distributions and instructions – You must have used federal Form 4972, Tax on Lump-Sum Distributions, to compute federal tax on lump-sum distributions.

• Use special formulas to figure a separate tax on the distribution that may result in a smaller tax than if taxable amount of the distribution was reported as ordinary income.
• Participant must have been born before January 2, 1936.

Question 46

Resident Credit Against Separate Tax on Lump-Sum Distributions

Who is eligible?

You are entitled to this nonrefundable credit if:

Answer 46

• you were a full-year or part-year resident individual of New York State, or a New York State resident estate or trust, or a part-year resident trust;
• the ordinary income portion of a lump-sum distribution you received (for example, from your employer’s pension, stock bonus, or profit-sharing plan) was from a business, trade, profession, or occupation carried on in another state, a local government within another state, the District of Columbia, or a province of Canada; and
• the distribution was taxed by that other jurisdiction.

Question 47

Other Tax Credits and Taxes

Resident Credit Against Separate Tax on Lump-sum Distributions

Answer 47

Resident Credit Against Separate Tax on Lump-sum Distributions

You must have used Form IT-230 above to claim this credit against the New York State separate tax on lump-sum distributions for any income tax imposed by another state, a political subdivision of that state, the District of Columbia, or a province of Canada from a business, trade, profession, or occupation carried on within that other jurisdiction.

Question 48

KNOWLEDGE CHECK- Section three

Question 1

1. The long-term care insurance credit is allowed for ____ of premiums paid by you or your business.
2. 20%
3. 10%
4. 8.82%
5. 3.88%

Answer 48

Answer:

1. 20%

Question 49

KNOWLEDGE CHECK- Section three

Question 2

2. What form is used to claim the Investment tax credit (ITC)?
3. Form IT-112
4. Form IT-212
5. Form DTF-210
6. Form IT-249

Answer 49

Answer:

2. Form IT-212

Question 50

KNOWLEDGE CHECK- Section three

Question 3

Which New York State form is used to compute the separate tax on sum disributions?

1. Form IT-221
2. Form 4970
3. Form IT-212
4. Form IT-230

Answer 50

Answer:

4. Form IT-230

Question 51

KNOWLEDGE CHECK- Section three

Question 4

Qualified tuition expenses include:

1. tuition paid through scholarships or other financial aid that need not be repaid
2. amounts paid for room and board
3. amounts paid for books, equipment, and activities
4. none of the above

Answer 51

Answer:

4. None of the above