Of the. Are there any other cities in New York State that impose an income tax?

Transcription

1 New York Tax Report 2014 Edition New York Personal Income Tax Although managing your portfolio is primarily an investment decision, tax considerations should also be taken into account. Accordingly, Morgan Stanley has prepared this New York Tax Report. It is not a complete description of New York tax law, but it does summarize many of the provisions of most interest to investors. Your Morgan Stanley Financial Advisor is available to discuss investment strategies which take the New York tax law into account. Keep in mind that Morgan Stanley, its affiliates and employees are not in the business of providing tax or legal advice. Clients should consult their personal tax or legal advisors before making tax-related investment decisions. New York State Personal Income Tax Rates for 2014* MARRIED FILING JOINTLY AND QUALIFYING WIDOW(ER) Over: But not over: Your tax is: amount over: $ 0 $16,700 $ % $ 0 16,700 22, % 16,700 22,950 27, % 22,950 27,150 41,800 1, % 27,150 41, ,900 2, % 41, , ,850 9, % 156, ,850 2,092,800 19, % 313,850 2,092, , % 2,092,800 SINGLE AND MARRIED FILING SEPARATELY Over: But not over: Your tax is: amount over: $ 0 $ 8,300 $ % $ 0 8,300 11, % 8,300 11,450 13, % 11,450 13,550 20, % 13,550 20,850 78,400 1, % 20,850 78, ,250 4, % 78, ,250 1,046,350 13, % 209,250 1,046,350 70, % 1,046,350 New York City Personal Income Tax Rates for 2014* MARRIED FILING JOINTLY AND QUALIFYING WIDOW(ER) Over: But not over: Your tax is: amount over: $ 0 $ 21,600 $ % $ 0 21,600 45, % 21,600 45,000 90,000 1, % 45,000 90, ,000 3, % 90, ,000 18, % 500,000 SINGLE AND MARRIED FILING SEPARATELY Over: But not over: Your tax is: amount over: $ 0 $ 12,000 $ % $ 0 12,000 25, % 12,000 25,000 50, % 25,000 50, ,000 1, % 50, ,000 18, % 500,000 * New York does not provide a benefit for a graduated rate schedule for high income taxpayers, refer to the tax computation worksheets in Instructions to Form IT-201 Are there any other cities in New York State that impose an income tax? The City of Yonkers imposes an income tax surcharge on residents at a rate of 15% of the net New York State Income Tax. Yonkers also imposes a nonresident earnings tax surcharge on wages earned in Yonkers at a rate of.5% (.005). Page 1 of 5

2 What are the retirement plan, IRA and Coverdell contribution limits for 2014? Contribution Limits IRA SIMPLE 401(k), 403(b), 457 Plans Coverdell Education Savings Account Simplified Employee Pension (SEP), Profit Sharing or Money Purchase Plan Basic Limits $5,500 $12,000 $17,500 $2,000 Lesser of 25%** of compensation or $52,000 Catch-up Limit (age 50 or older) 1,000 2,500 5,500* N/A 0 *A higher contribution limit may apply to 457 plan participants in the last three years before retirement. **For self-employed the limit is 20% of net-earnings after an adjustment for self-employment tax up to a maximum of $52,000. What is the New York personal income tax standard deduction for 2014? Filing Status Standard Deduction Single (and can be claimed as a dependent on another taxpayer s return) $3,100 Single (and cannot be claimed as a dependent on another taxpayer s return) 7,800 Married filing joint return 15,650 Married filing separate return 7,800 Head of household 10,950 Qualifying widow(er) with depedent child 15,650 What itemized deductions does New York allow? New York State (NYS) taxpayers who itemize deductions for federal income tax purposes may elect to take those same deductions (with certain modifications) for NYS tax purposes. For taxpayers with NYS adjusted gross income over $525,000 the modifications include a disallowance of 50% of the taxpayers itemized deductions for federal income tax purposes. Those with NYS adjusted gross income over $1 million are barred from claiming any itemized deductions except 50% of the charitable contribution deduction. Interest income from United States government and agency obligations is taxable at the federal level. How are these obligations treated for New York personal income tax purposes? Exempt from New York Personal Income Tax U.S. Treasury Bills, Notes, Bonds U.S. Savings Bonds Federal Home Loan Banks (FHLBs) Financing Corporation (FICO) Federal Intermediate Credit Banks Banks for Cooperatives Federal Farm Credit Banks Student Loan Marketing Association General Services Administration Export Import Bank of the U.S. Series 1978-B Tennessee Valley Authority ETRs, STRIPs, CATs, TIGRs Federal Land Banks Taxable for New York Personal Income Tax Government National Mortgage Association (GNMA) Federal National Mortgage Association (FNMA) Federal Home Loan Mortgage Corporation (FHLMC) International Bank for Reconstruction and Development (World Bank) Puerto Rico, Guam and the Virgin Islands Resolution Funding Corporation (REFCORP) Federal Housing Authority Debentures Page 2 of 5

3 Is municipal bond income exempt from New York personal income taxes? Interest on bonds issued by the State of New York or on municipal bonds issued by a county, city, town or other local government unit in the state is exempt from New York personal income tax. If a mutual fund invests in either federal obligations or New York municipal bonds, may a shareholder exclude the interest attributable to these obligations? Mutual fund shareholders may exclude the portion of the distribution derived from interest on obligations of the United States government, exempt United States agencies and United States possessions if, at the close of each taxable quarter, at least 50% of the value of the fund s assets are invested in any of these types of securities. Mutual fund distributions derived from New York state or local obligations are excludable. There is no percentage threshold requirement for New York obligations. Information on whether a fund qualifies for exclusion is available from the mutual fund company. How are qualified dividends, capital gains and capital losses treated in New York? Qualified dividends and capital gains are taxable as ordinary income. Capital losses are deductible in full against capital gains. Net capital losses are deductible against ordinary income up to a maximum of $3,000, with the remaining balance carried forward. There are some differences in New York and federal laws that may affect the amount of capital gain or loss to be reported. How are IRA, pension and qualified annuity distributions taxed? If you are age 59½ or older, you may subtract up to $20,000 of your IRA, pension and qualified annuity distributions from your federal adjusted gross income for purposes of determining your New York adjusted gross income. If you become age 59½ during the tax year, an exclusion is allowed only for the amount of IRA, pension and annuity income received on or after you became 59½, but not more than $20,000. Certain qualified pension benefits received by officers and employees of the United States, New York State and local governments within New York State are exempt from New York State, New York City, and Yonkers income taxes. Does New York law provide for an exclusion on the sale of a principal residence by a New York resident? Yes, under the same conditions as under federal law an individual may exclude up to $250,000 ($500,000 on a joint return) of gain if the ownership and residence tests are met. Are Social Security benefits taxable in New York? New York does not tax Social Security benefits. Can a New York resident open a Section 529 Qualified Tuition Program to help fund future education costs? Yes. Most states have established qualified tuition programs, also known as Section 529 plans. Residents of New York are free to choose from New York s plan or from a national plan offered through another state. The contribution limits, investment options and costs differ by program. New York allows a $5,000 per person (maximum $10,000 on a joint return) New York State tax deduction for Section 529 plan contributions to the New York State 529 College Savings Program. There is no federal deduction. Section 529 plan distributions are federal and New York state income tax free if used to pay higher education expenses, such as tuition, room and board, books, supplies and equipment required for enrollment at an eligible educational institution. For more information about the features of any state s Section 529 plan, go to Residents of New York working in another state Residents that live in New York and work in a different state are entitled to claim a credit for taxes paid to other jurisdictions, the credit is referred to as the New York State Resident Credit. The credit applies to taxpayers that have income from sources outside New York State and pay income tax to another state, a local government of another state, the District of Columbia, or to a province of Canada. The credit is allowable only for the portion of the tax that applies to income sourced to and taxed by the other taxing authority while you were a New York State resident. Form IT-112-R is filed with your New York State income tax return to claim the credit. Taxpayers that are liable for income tax in another state will need to file a non-resident return in that state, the amount withheld in the other state is claimed against their tax liability. Residents of other states working in New York Residents that live in other states and work in New York are required to file New York State non-resident income tax returns. Wages earned in New York are taxed in New York. Other states that levy an income tax have a similar credit available to New York s Resident Credit. What are the Rules for Same-Sex Married Couples (SSMCs) Filing Status? With the Supreme Court decision striking down the provision of the Defense of Marriage Act (DOMA), new for 2013, same-sex couples who are legally married can no longer file federal tax returns using the Page 3 of 5

4 single filing status. They can either file a joint return or file as married filing separately. New York State has given equal treatment to individuals legally married to different-sex spouses and same-sex spouses since the enactment of the Marriage Equality Act, which took effect on July 24, Opportunities may exist for filing amended tax returns, clients affected should consult with their tax advisor. Does New York State permit Transfer On Death Accounts? Yes. On January 1, 2006, New York introduced Transfer On Death (TOD) accounts. A TOD account is a relatively easy-to-implement planning tool that generally avoids probate. A TOD account permits the account owner to name beneficiaries to whom the account assets pass upon the account owner s death. Some attributes of a TOD account are: The account generally avoids probate since the assets are payable to a named beneficiary The account owner retains total control over the account during his or her lifetime The account owner may name anyone, including a minor, as beneficiary of the TOD account TOD may be used with single or joint accounts. If the account is registered as a joint account, then only on the death of the last surviving joint tenant, such as the surviving spouse, do the assets pass to the named beneficiaries The beneficiary designation on a TOD account generally takes precedence over the account owner s will. How does New York Tax Non-Residents? If you are a nonresident individual, estate, or trust, you are subject to tax on your New York source income. New York source income includes income derived from or connected with a business, trade, profession, or occupation carried on in New York State. If you are a partner in a partnership, New York source income also includes those items of income, gain, loss, and deduction included in your distributive share of partnership income that is derived from or connected with business carried on by the partnership in New York State. To compute the amount of tax due, use New York Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State. See New York State Department of Taxation and Finance publication 88 for more information. Does New York impose an estate tax? Yes, New York imposes an estate tax that is decoupled from the federal estate tax regime. In general, it applies to estates valued at more than $1 million. The New York State estate tax is in addition to the federal estate tax. An estate must file a New York State estate tax return if any one of the following conditions are met: 1. The decedent was domiciled in New York State at the time of death and the total of the federal gross estate and federal taxable gifts exceeds $1 million. 2. The decedent was not domiciled in New York State at the time of death; the estate includes real or tangible personal property with a situs in New York State; and the total of the federal gross estate and federal taxable gifts exceeds $1 million. 3. The decedent was neither a resident nor a citizen of the United States; the estate includes real or tangible personal property with a situs in New York State; and the estate is required to file a federal estate tax return, Form 706-NA. * At the time of printing this document, the 2014 New York State budget proposal includes major changes to the New York estate tax. Where can a taxpayer obtain more information on New York taxes? Information is available from the New York State Department of Taxation and Finance by calling Information and tax forms are also available on the New York State Department of Taxation and Finance Website at Page 4 of 5

5 How Do New York Tax-Exempt Yields Compare to Taxable Yields in Various Federal Income Tax Brackets for New York Residents? New York Federal Tax Brackets 25.00% 28.00% 33.00% 35.00% 39.60% Single $36,901-$89,350 $89, ,350 $186, ,100 $405, ,750 $406,751- Joint $73, ,850 $148, ,850 $226, ,100 $405, ,600 $457,601- Assumed New York State Rate 6.85% 6.85% 6.85% 6.85% 8.82% Federal Rate 25.00% 28.00% 33.00% 35.00% 39.60% Effective Combined Rate 30.14% 32.93% 37.59% 39.45% 44.93% 2.50% 3.58% 3.73% 4.01% 4.13% 4.54% 3.00% 4.29% 4.47% 4.81% 4.95% 5.45% 3.50% 5.01% 5.22% 5.61% 5.78% 6.36% 4.00% 5.73% 5.96% 6.41% 6.61% 7.26% 4.50% 6.44% 6.71% 7.21% 7.43% 8.17% 5.00% 7.16% 7.46% 8.01% 8.26% 9.08% 5.50% 7.87% 8.20% 8.81% 9.08% 9.99% New York City & State Combined Federal Tax Brackets 25.00% 28.00% 33.00% 35.00% 39.60% Single $36,901-$89,350 $89, ,350 $186, ,100 $405, ,750 $406,751-$ Joint $73, ,850 $148, ,850 $226, ,100 $405, ,600 $457,601-$ Assumed New York State Rate Federal Rate Effective Combined Rate (State/ City) 10.73% 10.73% 10.73% 10.73% 12.70% 25.00% 28.00% 33.00% 35.00% 39.60% 33.04% 35.72% 40.19% 41.97% 47.27% 2.50% 3.73% 3.89% 4.18% 4.31% 4.74% 3.00% 4.48% 4.67% 5.02% 5.17% 5.69% 3.50% 5.23% 5.45% 5.85% 6.03% 6.64% 4.00% 5.97% 6.22% 6.69% 6.89% 7.59% 4.50% 6.72% 7.00% 7.52% 7.75% 8.53% 5.00% 7.47% 7.78% 8.36% 8.62% 9.48% 5.50% 8.21% 8.56% 9.20% 9.48% 10.43% * This table does not account for the 3.8% medicare surtax on net investment income for high income earning taxpayers. The tax information herein is based on laws in effect as of March 1, Morgan Stanley Smith Barney LLC. Member SIPC. Page 5 of 5 NY CS /14