Ask the Expert: Explaining New York's tax breaks for pensions, Social Security

I’m 67 years old, married and just retired from the New York City Housing Authority. I had a large 2023 income. Some people told me that after you turn 66, you’re allowed to earn as much money as you want without being subject to taxes. Is that true?

I have two pensions, one from NYCHA and one from the New York City District Council of Carpenters. I was told that NYCHA workers don’t have to pay state tax on their pensions, but District Council of Carpenters members do. My District Council pension is $1,900 a month. My NYCHA pension is $38,000 a year. I also receive $3,300 in monthly Social Security.   

Whoever said you won’t owe taxes after turning 66, no matter how much you earn, was mistaken. You can earn too little to owe taxes, but you can’t be too old.

You won’t avoid taxes on your 2023 income. But on the bright side, a lot of your retirement income will be exempt from state tax. New York doesn’t tax the pensions of federal, state or municipal employees, so your $38,000 annual NYCHA pension is state tax-free. New York doesn’t tax Social Security, either, so your $3,300 monthly benefit is also state tax-free. And most of your District Council of Carpenters pension will be state tax-free because the New York pension and annuity exclusion exempts up to $20,000 of annual retirement income for every state resident who’s older than 59 ½.

Bear in mind that this $20,000 tax break is an individual exemption. You can’t pass an unused part of your exemption to your spouse. In other words, a married couple can exclude only $40,000 of retirement income from state tax if each spouse qualifies for a $20,000 exemption as an individual.

The bottom line:

You’re never too old to pay taxes.

More information:

https://bit.ly/47UIyDt

https://bit.ly/4301UG2