Ask the Expert: New York State tax breaks for retirement income

My wife and I both retired last year. Before we retired, our W-2 forms showed the New York State taxes that were withheld from our salaries. As retirees, we both receive Social Security and New York State pension benefits, and I have income from an annuity. No state taxes are withheld from any of this income. What’s the procedure for filing state taxes in 2025? Will we owe anything to the state?

Maybe not. It sounds as if a lot of your retirement income is exempt from state taxes.

New York doesn’t tax Social Security benefits or income from the pension and retirement plans of public employees (i.e., federal, state and municipal workers). And New York’s Pension and Annuity Income exclusion gives all state residents over age 59 ½ a tax exclusion on up to $20,000 of annual income from annuities and retirement accounts like IRAs and 401(k) plans.

Each state resident qualifies for the $20,000 Pension and Annuity Income exclusion as an individual. In other words, you can only claim it on income from your own accounts. Let’s say you have $25,000 of income from an annuity, for example, and your wife has $10,000 of income from an IRA. Together, you can claim a state tax exclusion on $30,000 — $20,000 of your income and $10,000 of her income. Together, a married couple only qualifies for a $40,000 exclusion if each spouse is independently eligible for a $20,000 exclusion.

On your 2024 New York State income tax return there will be a place to list “New York subtractions” from the taxable income you report on your federal return. The subtractions include your government pensions, the New York Pension and Annuity Income Exclusion and the taxable portion of your Social Security benefits.

The bottom line:

New York State gives special tax breaks to retirees.

More information:

bit.ly/Infoforretiredpersons

on.ny.gov/3y4Iuo8