Overview of New York Retirement Tax Friendliness
In New York, all Social Security retirement benefits are exempt from taxation. Income from retirement accounts or a private pension is deductible up to $20,000. Sales and property taxes are both relatively high in New York.
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New York Retirement Taxes
New York is the fourth-largest state in the U.S. with a population of nearly 20 million. Roughly half of that population lives in the greater New York City metropolitan area. Whether you plan on retiring in the city or somewhere further upstate - in the Adirondack Mountains, for example - it’s a good idea to be familiar with the Empire State’s retirement taxes.
When it comes to income taxes, New York State is very tax-friendly for retirees. All Social Security retirement benefits are exempt from taxation. Income from retirement accounts or a private pension is deductible up to $20,000.
There are several other types of taxes in New York that are not so favorable to retirees. The state’s sales taxes and property taxes both rank among the highest in the country. New York also has its own estate tax.
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Is New York tax-friendly for retirees?
New York is moderately tax-friendly for retirees. It does not tax Social Security benefits and provides seniors a sizable deduction of $20,000 on other types of retirement income. Retirees in New York should have relatively low income tax bills.
On the other hand, the state’s average state and local sales tax rate is 8.25% and property taxes are likewise fairly steep, with a state sales tax of 4%. The average effective property tax rate in New York State is 1.72%.
Is Social Security taxable in New York?
Social Security retirement benefits are not taxable under the New York state income tax, even if they are taxable at the federal level.
Are other forms of retirement income taxable in New York?
Yes, but they are deductible up to $20,000. Income from an IRA, 401(k) or company pension is all taxable. Seniors age 59.5 and older are eligible for the $20,000 deduction. This applies to the total of all retirement income. Any retirement income that exceeds the $20,000 deduction will be taxed according to the rates show in the table below.
One exception to this is public pension income. Pension income that is paid by the New York State government, a local New York government or the federal government is exempt from all state income taxes.
How high are property taxes in New York?
New York's overall average effective rate is 1.72%, which implies $1,720 in annual property taxes for every $100,000 in home value. Rates in New York City are far lower than that, averaging 0.98% across the city’s five boroughs.
High home values mean property tax bills can still be quite high, though. For example, the median annual property tax paid by homeowners in Manhattan is more than $9,000.
What is the New York STAR program?
The School Tax Relief (STAR) program offers New York State homeowners property tax relief. It is available to any homeowner with household income of $250,000 ($500,000 combined for couples) or less.
The state also offers a school tax bill reduction to eligible homeowners who have been claiming it for their primary residences since 2015. This exemption is no longer available to new homeowners.
How high are sales taxes in New York?
The average sales tax rate in New York, including the statewide rate of 4% and averaging all city and county rates, is 8.25%. That is the 10th-highest rate in the U.S. At that rate, someone who spends $10,000 a year on taxable goods would be spending about $825 in sales taxes.
Not all products are subject to sales tax in New York. Groceries are usually exempt, as are clothing items costing less than $110. Both prescription and over-the-counter medicines are also exempt from sales tax in New York.
What other New York taxes should I be concerned about?
New York State has its own estate tax, which is collected in addition to the federal estate tax. The exemption for tax year 2023 is $6.58 million, and will be $6.94 million in 2024. Estate tax rates for amounts above these exemptions range from 3.06% to 16%.
Retirees who plan on supplementing their retirement income with investment income (from investments that are not held in a retirement account) may also have to pay capital gains taxes. Capital gains are considered regular income in New York and taxed at the state’s income tax rates (shown in the table above).
