Senior citizens or retired individuals filing a New York state income tax return may qualify for special income tax benefits and breaks that can reduce tax liability, including subtraction modifications and credits. Some examples of income exempt from New York state taxation include Social Security benefits, New York state pensions, pensions from local and federal governments, and the pension and annuity income exclusion. Tax credits may also decrease tax liability, and some are refundable. Examples include the child dependent care credit, earned income credit, automated external defibrillator credit, long-term care insurance credit, and nursing home assessment credit. The New York State Department of Taxation and Finance discusses these items in detail in Publication 36. The ensuing discussion highlights the tax benefits that could be beneficial to seniors and retired individuals.

Pensions of New York State, Local Governments and the Federal Government

Qualified pension benefits or distributions 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. This subtraction modification is allowed regardless of the taxpayer’s age or the form the payments take. This subtraction modification is allowed for a pension or distribution amount to the extent the pension or other distribution was included in the individual’s federal adjusted gross income.

Pension and Annuity Income Exclusion

If a taxpayer was age 59½ or older before Jan. 1, 2013, that individual may exclude up to $20,000 of qualified pension and annuity income from federal adjusted gross income for purposes of determining New York adjusted gross income. If that taxpayer reached age 59½ during the tax year, the exclusion is allowed only for the amount of pension and annuity income received on or after the individual became 59½, but not more than $20,000.

Married taxpayers who each receive pension income are each entitled to a maximum pension and annuity income exclusion of $20,000, whether they file jointly or separately; however, they cannot claim any unused portion of their spouse’s exclusion. If a taxpayer receives his own pension income and a deceased spouse’s pension income, that taxpayer is entitled to a maximum pension and annuity exclusion of $20,000 each year.

Long-Term Residential Care Credit

A resident in a qualified continuing care retirement community is allowed a subtraction from federal adjusted gross income when computing New York adjusted gross income for the portion of fees paid during the year that is attributable to the cost of providing long-term benefits under a continuing care contract. If an individual is married, then she should file a joint return; if she and her spouse both qualify, then they may each claim the subtraction. She may not, however, claim any unused part of her spouse’s subtraction. The maximum deduction for 2013 was $4,550 per continuing care resident.

Child and Dependent Care Credit

If an individual qualifies to claim the federal child and dependent care credit, he can claim the New York state child and dependent care credit (regardless of whether the federal credit was claimed). The New York state credit is based on a percentage of the federal credit. Full-year and part-year New York City residents may also qualify for the New York City child and dependent care credit. If an individual did not file a claim for the federal child and dependent care credit, that taxpayer may still be eligible to claim the New York state child and dependent care credit.

Earned Income Credit

The New York state earned income credit (EIC) is a special income tax credit for certain people who are low income wage earners. If a taxpayer claimed the federal EIC and filed a New York state income tax return, that person qualifies to claim the New York state EIC. This credit ranges from 20 percent to 30 percent of the federal credit and is based on earned income. New York City full-year residents and New York City part-year residents who claimed the federal EIC may claim a New York City EIC. They must file a New York income tax return to claim the New York City EIC. This credit is in addition to the New York state EIC or noncustodial parent New York state EIC.

Real Property Tax Credit

Taxpayers may qualify for the real property tax credit if they are a New York state resident, their household gross income for the tax year was $18,000 or less, and they pay either real property taxes or rent for their residence. If all qualified members of the household are under age 65, the credit can be as much as $75. If at least one qualified member of the household is age 65 or older, the credit can be as much as $375. Residents who are not required to file New York state returns may qualify for a refund of the full amount of the credit. Note that part-year residents and nonresidents of New York state do not quality for this credit.

Credit for Purchase of an Automated External Defibrillator

This credit is available to taxpayers who purchase a qualified automated external defibrillator. The credit is equal to the lesser of the purchase cost of the unit, or $500. There is no limit on the number of units purchased during the tax year for which the credit may be taken; however, the credit cannot exceed $500 for each unit purchased. The credit is not refundable, and the taxpayer may not carry any unused credit forward to future years.

Long-Term Care Insurance Credit

The long-term care insurance credit is equal to 20 percent of the premiums an individual paid during the tax year for the purchase of, or for continuing coverage under, a qualifying long-term care insurance policy. The long-term care insurance credit is limited for part-year and nonresident individuals, estates, and trusts to the amount determined by multiplying the total credit by the individual’s income percentage.

Nursing Home Assessment Credit

New York state allows a personal income tax credit for the portion of the assessment imposed on a residential healthcare facility (nursing home) pursuant to Public Health Law section 2807-d(2)(b) that is passed through to a private-pay resident of the nursing home. The amount of the credit is equal to the total portion of the assessment that is passed through and directly paid by an individual during the year (e.g., the total portion paid during 2013).

Joseph Rosoff, CPA, is a tax supervisor at WithumSmith+Brown, focusing on state & local tax, family office, business and individual tax. He has more than 10 years of experience in tax preparation of individual, corporate, partnership, and trust tax returns. He is very knowledgeable of Go-System tax software and has taught a CPE course on it. He earned his bachelor’s degree from Brooklyn College and is a member of the NYSSCPA’s State and Local Tax Committee and the AICPA.