HAVE A QUESTION? CALL US AT (872) 266-3015
New York State
Taxable Income Report
New York offers some generous retirement tax breaks—along with a few costly pitfalls. From income rules to property tax relief and estate planning traps, knowing the milestones and fine print can make all the difference.
By RetirementRedFlags.com
Social Security
New York does not tax Social Security. If you live in NYC or Yonkers, the city tax doesn’t touch Social Security either.
What this means: You don’t pay New York or NYC/Yonkers income tax on your Social Security. If you receive $30,000 of Social Security and $80,000 of investments, New York starts with the $80,000 (and then applies any other NY exclusions/credits that fit your situation).
Public Pensions
Benefits from NYSLRS/TRS/PFRS, federal civil service, and military pensions are 100% exempt from NY and NYC/Yonkers income tax.
What this means: If your income is all public pension, you’ll typically owe no state or local income tax on it. Example: $50,000 NYSLRS pension → $0 taxed by New York or NYC.
IRAs, 401(k)s, 403(b)s, Private Pensions, & Annuities
After age 59½, New York lets you exclude up to $20,000 per person, per year of most private retirement income (IRAs, 401(k)/403(b), private pensions/annuities). Public pensions don’t need this—they’re already fully exempt.
What this means: A married couple where both are 59½+ can usually exclude $40,000 total from their combined IRA/401(k)/annuity withdrawals each year. Example: $60,000 of IRA withdrawals → $40,000 excluded, $20,000 taxed by NY.
Capital Gains & Dividends
New York taxes capital gains and ordinary dividends the same as regular income (no special lower state rate).
What this means: Selling stock with a $25,000 long-term gain adds $25,000 to your NY taxable income (after other exclusions/deductions). Plan sales around brackets and your $20k retirement exclusion.
Interest (Treasuries, Bank/CDs, Munis)
- U.S. Treasuries (T-bills/notes/bonds): Tax-free in NY and NYC/Yonkers.
- Bank/CD interest: Taxable in NY (and by NYC/Yonkers if you live there).
- NY municipal bonds: Generally tax-free in NY; other states’ munis are typically taxable in NY.
What this means: Placing savings in Treasuries or NY munis can reduce your state and city tax bill versus bank CDs. Example: $10,000 interest from Treasuries → $0 to NY/NYC; $10,000 bank interest → fully taxable to NY/NYC.
Property Tax Relief for Seniors
Programs like STAR (Basic and Enhanced STAR at 65+ with an income limit) and local senior exemptions (e.g., SCHE) can reduce your school/property taxes.
What this means: If you own and live in your home and meet age and income rules, you can lower your annual property tax—often by hundreds to thousands of dollars. Apply with your assessor/tax office; benefits vary by locality.
Estate & Inheritance
New York has no inheritance tax on what heirs receive. But it does have a state estate tax on what the estate owns when someone dies. For 2025, the NY estate tax exclusion (the amount you can pass before NY estate tax applies) is $7.16 million per person.
The “cliff,” simply: Imagine a drawbridge. If the total taxable estate is at or under the exclusion, you roll across tax-free. But if your estate is just a hair over ~105% of the exclusion, the bridge drops—you lose the entire exclusion and New York taxes the whole estate, not just the dollars above the line. For 2025, 105% of $7.16M is $7.518M. If you’re at or above that, the exclusion vanishes.
Quick examples (rounded):
- $7.10M estate (under the exclusion): No NY estate tax.
- $7.20M estate (~101%): Some exclusion remains; reduced NY tax after the formula.
- $7.55M estate (≥105%): Exclusion wiped out; NY tax applies to all $7.55M (rates up to 16%). That’s the “cliff.”
Gifts & “clawback” caution: New York adds back certain gifts made within 3 years of death when it computes the state estate. The current addback rule applies to deaths from Jan 16, 2019 through Dec 31, 2025 (exceptions apply, e.g., gifts while a nonresident). “Deathbed” gifts may not avoid NY estate tax.
Married couples—no NY “portability”: Unlike federal law, New York doesn’t let a surviving spouse use the deceased spouse’s unused NY exclusion. Each spouse must plan to use their own. That’s why many NY couples still consider credit-shelter (bypass) trust planning.
What this means: If you expect to be near the line (say $6.8M–$7.6M), small moves (charitable bequest, gifting strategy outside the 3-year window, titling) can be the difference between $0 and a six- or seven-figure NY estate tax. If you’re a couple, consider structures that use both $7.16M exclusions, because NY won’t transfer an unused one to the survivor.
Snowbird & Relocation
You’re a statutory NY resident if you keep a permanent place of abode in NY and spend more than 183 days (i.e., 184+ days) in the state—regardless of your “domicile.”
What this means: If you claim Florida but spend seven months in New York while keeping a NY home, New York can tax you as a resident. Keep day logs and proof of domicile if you plan to change residency.
Age-Based Milestones to Watch
- 59½: NY’s $20k pension/annuity/IRA exclusion begins (per person).
- 65: Eligibility for Enhanced STAR and many local senior exemptions.
- 70½: QCDs from IRAs can lower federal AGI (often helps NY too).
- 73: RMDs begin (current federal age).
Additional Smart Moves to Consider
- Bracket management / Roth conversions before RMDs—coordinate with the $20k NY exclusion per spouse and watch IRMAA.
- Schedule a Red Flag Review Call with our team. This call is designed to uncover your blind spots before they become problems. In less than an hour, we’ll walk through your current plan together, point out any areas of concern, and give you practical next steps you can act on right away. You can reserve your complimentary call here: Book My Red Flag Review
*Because common sense isn't always 'common', here is the legal disclosure: This article is for informational purposes only and does not constitute financial, investment, tax, or legal advice. Retirement Red Flags does not guarantee the accuracy or completeness of the information provided. All investments involve risk, including potential loss of principal. Readers should conduct their own research and consult with a professional advisor before making any financial decisions. I am not an attorney, CPA, or financial advisor.