On February 13, 2012, the New York State Department of Taxation and Finance issued guidance in the form of a Technical Services Bureau Memorandum, TSB-M-12(3)I. This guidance summarizes the personal income tax changes and tax incentives specified in the budget bill enacted December 9, 2011 (Chapter 56, Laws 2011),[1] and signed by Governor Andrew M. Cuomo on December 12, 2011. TSB-M-12(3)I creates additional tax rate brackets and rates. The amended tax tables and other changes are discussed below.
Revised Individual Tax Rates
Effective for tax years 2012 through 2014, the personal income tax rates for middle class taxpayers are reduced. The highest tax rate is reduced from 8.97% in 2011 to 8.82%. Moreover, the guidance creates additional tax brackets and rates ranging from 4% to 8.82%. The tax rate tables are reproduced below.
Married filing jointly and qualified widow(er)
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If the New York taxable income is:
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The tax is:
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Not over $16,000
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4% of the New York taxable income
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Over $16,000 but not over $22,000
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$640 plus 4.5% of excess over $16,000
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Over $22,000 but not over $26,000
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$910 plus 5.25% of excess over $22,000
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Over $26,000 but not over $40,000
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$1,120 plus 5.9% of excess over $26,000
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Over $40,000 but not over $150,000
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$1,946 plus 6.45% of excess over $40,000
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Over $150,000 but not over $300,000
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$9,041 plus 6.65% of excess over $150,000
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Over $300,000 but not over $2,000,000
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$19,016 plus 6.85% of excess over $300,000
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Over $2,000,000
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$135,466 plus 8.82% in excess over $2,000,000
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Head of Household
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If the New York taxable income is:
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The tax is:
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Not over $12,000
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4% of the New York taxable income
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Over $12,000 but not over $16,500
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$480 plus 4.5% of excess over $12,000
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Over $16,500 but not over $19,500
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$683 plus 5.25% of excess over $16,500
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Over $19,500 but not over $30,000
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$840 plus 5.9% of excess over $19,500
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Over $30,000 but not over $100,000
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$1,460 plus 6.45% of excess over $30,000
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Over $100,000 but not over $250,000
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$5,975 plus 6.65% of excess over $100,000
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Over $250,000 but not over $1,500,000
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$15,950 plus 6.85% of excess over $250,000
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Over $1,500,000
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$101,575 plus 8.82% of excess over $1,500,000
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Single, married filing separately, and estates and trusts
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If the New York taxable income is:
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The tax is:
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Not over $8,000
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4% of the New York taxable income
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Over $8,000 but not over $11,000
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$320 plus 4.5% of excess over $8,000
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Over $11,000 but not over $13,000
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$455 plus 5.25% of excess over $11,000
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Over $13,000 but not over $20,000
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$560 plus 5.9% of excess over $13,000
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Over $20,000 but not over $75,000
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$973 plus 6.45% of excess over $20,000
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Over $75,000 but not over $200,000
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$4,521 plus 6.65% of excess over $75,000
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Over $200,000 but not over $1,000,000
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$12,833 plus 6.85% of excess over $200,000
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Over $1,000,000
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$67,633 plus 8.82% of excess over $1,000,000
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Standard Deduction
Effective for tax years 2012 through 2014, the New York standard deduction of a resident individual will be indexed by a cost-ofliving percentage adjustment. For tax years 2015 and after, the standard deduction will be fixed at the amount allowable for the tax year 2014.
Tax Benefit Recapture
- Effective for tax years 2012 through 2014, a temporary supplemental tax will be imposed, in addition to the personal income tax. It is intended to recapture the tax benefit that a taxpayer receives in calculating taxes from the tax table rates above to the highest applicable rate. This supplemental tax only applies to taxpayers whose adjusted gross income exceeds $100,000.
- Effective for tax years beginning after 2014, the tax tables and rates revert to those in effect after 2005 and before 2009, subject to cost-of-living adjustments. Thus, the highest tax rate then in effect will be 6.85%. For these post-2014 years, a supplemental tax will be imposed to recapture the tax benefit received from the applicable tax table rates to the highest rate.
This supplemental tax also applies only to taxpayers whose adjusted gross income exceeds $100,000.
Tax Incentives
The budget bill established two new tax incentive programs: the Empire State Jobs Retention Program, administered by the Empire State Economic Development Corporation; and the New York Youth Works Tax Credit, administered by the New York State Department of Labor. Both of these tax credits are available to businesses as well as qualified employers subject to tax under Article 22 (Personal Income Tax). A taxpayer that is a partner in a partnership, member of a limited liability company, or shareholder in a New York S corporation that qualifies for the credit may claim his or her pro rata share of the credit earned by the partnership, limited liability company, or S corporation.
1. Empire State Jobs Retention Program
This tax incentive was established to create financial incentives to retain strategic businesses and jobs that are at risk of leaving the state due to an impact on business operations of an event (such as a natural disaster) leading to an emergency declaration by the governor. Tax credits equal to 6.85% of the gross wages paid for the affected jobs will be offered to qualifying businesses. In order to be considered a qualifying business, the business must operate in New York State predominantly:
- As a financial services data center or financial services bank office;
- In manufacturing;
- In software development and new media;
- In scientific research and development;
- In agriculture;
- In the creation or expansion of back office operations in the state; or
- In a distribution center.
The qualified business also must:
- Be located in a county in which an emergency has been declared by the governor on or after January 1, 2011;
- Demonstrate substantial physical damage and economic harm resulting from the event leading to the emergency declaration; and
- Have had at least 100 full–time equivalent jobs in the county in which the emergency was declared on the day preceding the day the event leading to the declaration occurred, and must retain or exceed that number of jobs in New York State.
The tax credit may be claimed for up to ten consecutive years, provided the eligibility requirements are met each year. In order to participate, an eligible business must apply to and be certified by the Empire State Development Corporation within 180 days of a declaration of emergency by the governor in the county in which the business is located, or by June 6, 2012, whichever is later.
2. New York Youth Works Tax Credit Program
This tax credit was established to provide tax incentives to qualified businesses employing at-risk youths in full-time and part-time positions in 2012 and 2013. An interested employer must submit an application to the Department of Labor by June 1, 2012, to participate, and the qualified employees must start their employment on or after January 1, 2012, but no later than July 1, 2012. If an employer meets the qualifying criteria, the employer will receive a tax credit in the following two amounts:
- $500 per month for up to six months for each qualified employee employed in a full-time job or $250 per month for up to six months for each qualified employee employed in a part-time job of at least 20 hours per week; and
- $1,000 for each qualified employee who is employed for at least an additional six months by the employer in a full-time job and $500 for each qualified employee employed for at least an additional six months in a part-time job of at least 20 hours per week.
The first amount of the credit is allowable only for tax years 2012 and the second amount is allowable for tax years 2012 and 2013. If the credit allowed exceeds the tax, the excess will be treated as an overpayment of tax to be credited or refunded (without interest).