December 15, 2011

The New York State Legislature recently passed a budget bill that makes several changes to the New York State Tax Law. 

Personal Income Tax Rates

The income tax surcharge put in place in 2009 has been allowed to expire as of December 31, 2011.  However, instead of the top tax rate reverting back to 6.85% from 8.97% as originally scheduled, an entirely new rate structure has been enacted which both decreases the tax rates slightly for middle income taxpayers and creates new tax brackets for high income taxpayers. The new structure will be in place for 2012 through 2014.  The new and old rates (for married couples filing a joint return) are as follows:

                                                                      New Rate                    Old Rate

Income over $40,000 up to $150,000                6.45%                         6.85%

Income over $150,000 up to $300,000              6.65%                         6.85%

Income over $300,000 up to $500,000              6.85%                         7.85%

Income over $500,000 up to $2,000,000           6.85%                         8.97%

Income over $2,000,000                                    8.82%                         8.97%

The effect of this is a small reduction in the rate for individuals with taxable income over $40,000.  Married taxpayers filing separately will reach the new 8.82% bracket when income reaches $1,000,000.  Heads of households will reach the 8.82% bracket when income reaches $1,500,000.  Please note that as incomes increase, the benefit of the lower income tax brackets are phased out.  So for married taxpayers filing a joint return with income over $2,050,000, all of their income will be taxed at 8.82%.  The state will be releasing new tables in the coming weeks. 

Metropolitan Commuter Transportation Mobility Tax (MCTMT)

 The tax has been reduced and eliminated for small employers.  The new tax structure for quarters beginning on April 1, 2012 is as follows:

 Beginning with the quarter starting on April 1, 2012 the MCTMT will be eliminated for employers with less than $312,500 of payroll in any calendar quarter.  The rate will be 0.11% for employers with wages over $312,500 up to $375,000 in any calendar quarter.

The rate increases to 0.23% for employers with wages over $375,000 up to $437,500 in any calendar quarter.

The rate remains at 0.34% for employers with wages over $437,500 in any calendar quarter.

For self-employed taxpayers, the earnings threshold increases from $10,000 to $50,000.

Please call us if you would like additional information about how these tax acts may affect you.