5 Tips to Lower Your State Tax Bill in New York: In spite of the fact that New York is an attractive destination, whether for visitors or residents, it has one unenviable feature, some of the highest taxes in the country.
New Yorkers face a daunting task preparing their tax declarations each tax season due to combined state and city income taxes, property taxes, and other levies. However, there are ways to possibly lighten your tax burden in the Empire State.
5 Tips to Lower Your State Tax Bill in New York:
Contribute to an IRA or similar retirement account
Your taxable income can be reduced by contributions to retirement plans such as 401(k) plans, IRAs, or self-employed retirement plans. You are allowed to contribute up to $19,500 to your 401(k) plan in 2023.
Contributions to certain retirement plans are also tax deductible in New York State.
Take advantage of tax credits
New York State offers various tax credits, including Earned Income Tax Credits (EITC), Child and Dependent Care Credits, and Empire State Child Credits, that can reduce your total tax liability. There are also several income tax credits available to New York City residents, whether they live there full-time or part-time.
Taxpayers in financial distress can take advantage of the Offer in Compromise program, which allows them to pay a reasonable part of their tax liabilities in order to cope with staggering tax liabilities.
Maximize education tax benefits
Consider the New York State 529 College Savings Program and the American Opportunity Tax Credit if you or your dependents are pursuing higher education
You can reduce your state taxable income by up to $5,000 for individual filers and $10,000 for married couples filing jointly by contributing to a New York 529 plan.
Deductions should be itemized
Your tax bill may be reduced if you itemize deductions such as mortgage interest, property taxes, charitable contributions, and medical expenses, which exceed the standard deduction. It is a good idea for New York residents to itemize their state and local taxes because this can result in substantial state and local tax deductions.
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Invest in property
In New York, mortgage interest and property taxes can be deducted from your tax bill as itemized deductions. Investing in real estate can be a strategic way to build wealth, as well as a way to reduce your tax bill.
Depreciation and maintenance expenses can be used to reduce taxable income and offset income from rent.
It is always recommended that you speak with a trusted financial advisor who can guide you through the process to maximize your potential deductions and avoid any pitfalls.
