Attention New Yorkers – Tax Changes Coming Your Way

I’m assuming you’ve all already read the New York State 2021-22 budget, but just in case you haven’t, let’s recap some of the highlights that may be relevant to your wallet and your business.

The Pass-Through Entity Tax Election

New York is jumping on the bandwagon in an effort to sidestep the federal SALT deduction limitation imposed by the 2018 tax changes. NYS is creating an optional pass-through entity tax starting in 2021. Partnerships and S-Corps can elect to pay state taxes at the entity level, which will be deductible as business expenses, in exchange for a personal income tax credit that will pass through to the owners. The pass-through entity tax rate will range from 6.85% to 10.9% depending on the entity’s taxable income.

Legalization of Mobile Sports Betting

Tired of New Yorker’s Venmo-ing their friends in New Jersey to bet on the Jets to win the superbowl, New York has legalized mobile sports betting. Mobile betting platform providers will be required to pay a tax based on the percentage of the sports wagering gross gaming revenue that is attributed to mobile sports betting.

Tax Increases for High Earners

  1. The current top income tax rate is increasing from 8.82% to 9.65% (for those making in the ~$1 million to $5 million range
  2. Two new tax brackets have been added for high earners, with a rate of 10.3% on income between $5 million and $25 million and a rate of $10.9% on income over $25 million
  3. The corporate franchise tax rate is increasing from 6.5% to 7.25% for taxpayers with business income exceeding $5 million

Property Tax Relief

NYS has enacted a property tax relief credit for homeowners with income up to $250,000 beginning in 2021. Homeowners will be eligible for the credit if their property tax exceeds a fixed percentage of their income.

No Benefit for Qualified Opportunity Zone Fund Investments

The budget bill requires that any gain excluded from federal gross income due to an investment in a qualified opportunity zone fund and applicable to tax years starting in 2021 will be added back when determining New York taxable income. This addback applies to NY corporate tax, insurance tax, and personal income tax, as well as NYC corporate tax and UBT.

Note sure if something here applies to you or how to optimize your tax situation? Let us know, we can help!

The topics discussed above are new, complicated, and subject to change. Always consult your tax advisor before making any tax-related decisions.