Individuals and businesses in the State of New York are both subject to income tax. New York enacted a sweeping tax-reduction bill in 2011, creating the lowest mid-bracket tax rates in the state in 58 years. These tax breaks affected over four million taxpayers. Despite this legislation and other New York tax breaks, New York still has one of the highest state income tax rates in the nation.
New York Personal Income Tax
New York personal income tax rules and regulations are quite similar to federal individual income tax rules. New York minimally deviates from the federal rules. Examples are its exempting pension income and adding deductions for college tuition and college savings. New York uses a progressive eight-bracket system to calculate tax in which tax rates increase as income increases. New York’s tax rates range from 4% to 8.82%.
New York Corporate Income Tax
If your business is incorporated in New York State or does business or participates in certain other activities in New York State, you may have to file an annual New York State corporation tax return. The way you compute the tax and the type of return you file will depend on the type(s) of business your corporation conducts. New York has a corporation franchise tax, which applies to both traditional (C-type) corporations and to S corporations.
For traditional corporations, the amount of corporation franchise tax due is the highest of the following four amounts:
- The corporation’s entire net income (ENI) based on federal taxable income with certain New York-specific modifications, taxed at 7.1%.
- The corporation’s business and investment capital which is the total investment and business capital allocated to New York State after deducting short-term and long-term liabilities attributable to assets. The tax rate applied to this amount is 0.15%, with a cap of $1 million in taxes. The cap for qualified manufacturers using this method is $350,000.
- The corporation’s minimum taxable income (MTI) which is a business’s entire net income allocated to New York State plus certain federal tax preferences and adjustments that are allocated to New York. The tax rate on this amount is 1.5%; but for qualified manufacturers, the tax rate on this amount is 0.75%.
- A fixed dollar minimum (FDM) tax based on a corporation’s New York State gross receipts.
S corporations may use the gross receipt method to calculate taxes, and are taxed at lower rates than traditional corporations. The effective maximum corporation franchise tax on S corporations in New York is $4,500.
If you are a New York resident or employer with questions about New York State personal or corporate income tax, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
