Never A Dull Moment for Retirees in New York State
Retirees in New York are offered several tax advantages and property tax benefits, along with outstanding cultural and lifestyle opportunities
By Marianela Collado, CPA/PFS
Having been born and raised in New York State/City, I know first-hand that New York has a lot to offer folks looking for an active lifestyle in retirement. While some may look at the decision as to where to retire purely on financial terms, I believe you must consider both quantitative and qualitative factors when considering a state for retirement.
From a qualitative standpoint, there is always something to do in New York City and mass transit makes it so easy to get around with senior discount perks. Because the city is so easy to navigate, it offers an opportunity to stay active. From the theatres to restaurants and wonderful sights, it doesn’t offer a dull lifestyle in retirement. The winters, while milder than some other states, could get a little chilly but it offers a continual beauty in the change of seasons.
Personal income tax
From an income tax perspective, New York State/City isn’t bad especially when considering the various benefits and exemptions available to seniors.
New York requires that any interest income derived from non-NY municipal bonds be added back since it isn’t included in Federal taxable income. On the flip side, any interest from US Government Bonds, which are included in federal adjusted gross income, are not subject to New York state income tax. New York also allows a deduction of up to $5,000 ($10,000 if married filing jointly) for contributions to a NY 529 College Savings Plan.
After reducing your income by all the available exemptions and subtractions, New York offers a standard deduction of $8,000 for single taxpayers and $16,050 for married taxpayers filing jointly to further reduce your New York taxable income.
To alleviate the burden caused by the $40,000 ($10,000, if income is greater than $500,000) cap on the deductible state and local taxes at the federal level, New York allows taxpayers to itemize whether they are itemizing at the Federal level.
Based on the 2024 income tax brackets and rates, the New York State income tax rates begin at 4% when taxable income is at or below $8500 and $17,150 for single and married taxpayers filing jointly, respectively. The tax rates go as high as 10.9% when taxable income exceeds $25,000,000. If you live in New York City, you’d also have to pay an additional tax of between 3.078% and 3.875%. There’s also an additional tax imposed if you happen to reside in Yonkers.
Social Security and retirement income
When the bulk of the income for retirees consists of Social Security and pension, the income subject to tax is greatly reduced. Social Security benefits are not subject to New York State income tax. For those 59 ½ or older who receive a pension and/or distributions from 401(k)s, 403(b)s and IRAs, they can subtract up to $20,000 from their taxable pension. That deduction is doubled for taxpayers filing jointly. To magnify these benefits any Federal, New York State or local government pensions are completely exempt from New York State/City taxes regardless of age.
Healthcare & Medicare
One little-known benefit only available in one of two states, New York being one of them, is the ability to enroll and switch Medigap plans any time of the year without having to undergo medical underwriting. This allows New York residents to upgrade or downgrade their Medigap programs freely which would be either impossible or very expensive in other states.
Property tax
Housing could get a little pricey, particularly in areas in or around New York City. It is much more feasible to find affordable housing in areas outside of the city in the surrounding suburbs. Property taxes will vary based on where you live. The good news for seniors is that they can take advantage of special exemptions under the NY STAR Program resulting in either reduced property taxes or credits. For senior homeowners, the STAR program could result in a reduction in the home’s assessment value by up to 50%.
In addition to the STAR program, municipalities may also grant a reduction in property taxes for qualifying low-income seniors who meet income limitations and other requirements.
Seniors may receive both the STAR exemption and the “over 65” property tax exemption. Even if you do not meet the lower bar for low income to receive the senior citizen’s exemption, you may still be able to receive the STAR exemption.
Estate tax
New York is one of 12 states that has a separate estate tax. New York’s estate tax exemption is lower than the Federal exemption. For 2026, the federal exemption is $15,000,000 while the New York exemption is about half of the Federal or $7,350,000. The estate tax rates range between 3.06% and 16%. However, it is important to know that the estate tax is calculated as a cliff whereby the applicable tax rate is the top rate of 16% once your estate exceeds 105% of the New York exemption (or $7,717,500 for 2026). One very notable aspect of the New York exemption is that unlike the Federal exemption, any unused portion of the New York exemption is not portable to a surviving spouse, which makes planning for New York residents that much more critical.
New York, like most states, does not have a gift tax so there’s no limit to how much you give during your lifetime. Any gifts made within three years of your death will be subject to claw back and will be includible in your taxable estate. Also beware that while there may be no New York gift tax on a current year gift, if it exceeds the Federal annual exclusion, it will eat into your federal estate tax exemption.
Conclusion
I always say that you can’t let the tax tail wag the dog and it is especially true when it comes to choosing where someone may want to live the retirement chapter of their life. While it isn’t always about the finances, it is important to consider the impact of living in one state over another. Income taxes may not present such a huge issue but depending on someone’s overall net worth, the estate tax exposure might be more of an issue.
Because planning for retirement is such a big decision, having a financial professional in your corner can be a great asset. You can find a licensed professional here.
About the author
Marianela Collado, CPA/PFS is a CEO Senior Wealth Advisor at Tobias Financial Advisors in Plantation, Florida. She is also a member of American Institute of CPA’s PFP Committee and PFP Champions Task Force.