NY State Comptroller Study Sounds Alarm On Provisions In New Tax Code

NEW YORK — The wealthiest New Yorkers will benefit from the recently approved federal budget and tax changes, but the rest of us will not fare so well, according to a concerning new study from the New York State Comptroller's Office.

The new report from State Comptroller Thomas P. DiNapoli analyzed the federal tax provisions enacted at the beginning of July and how they may impact New Yorkers.

The study finds that while the bill made permanent many tax changes included in the 2017 Tax Cuts and Jobs Act (TCJA), it includes new tax breaks for seniors and the working class that are largely temporary. These "minimal tax benefits," along with the significant cuts in safety net spending included in the legislation, will put a larger burden on New Yorkers trying to make ends meet, according to the state agency.

"Many of the tax benefits in the federal legislation passed in Washington this summer will continue to go to those with higher incomes," DiNapoli said. "This was a lost opportunity to improve the tax code; instead, the new federal law adds complexity and creates inequities. Low-and middle-income New Yorkers will see few long-term benefits while bearing most of the burden of the bill's significant spending cuts to vital programs."

The newly enacted provisions reportedly aimed at helping working class Americans are temporary and limited in scope, according to the study. New deductions for seniors, tip income, overtime pay, and interest on new car loans, for example, are in effect only for tax years 2025 to 2028.

The study's authors found that the deductions that might help low and middle income tax payers target a small portion of the population or treat taxpayers with similar wages or even in the same business unequally. For example, approximately 6 percent of the jobs in New York are in occupations, such as wait staff, bartenders, personal care workers, delivery drivers and hotel staff, that regularly and customarily receive tips. As a result, parking lot and coat room attendants, who will benefit from the deduction for tipped income, could potentially have their federal tax burden eliminated while childcare workers and home health aides who generally do not receive tips will not, the study concluded.

In 2031, when these temporary provisions expire, it is expected that those with incomes of less than $30,000 will see their federal tax liability increase, according to the report.

The study finds that even the most popular provision for New Yorkers in the so-called "big, beautiful bill" may be fleeting.

The new federal law permanently limits the itemized deduction for state and local taxes (SALT) paid to $10,000. For tax year 2025, the limit is increased to $40,000 for taxpayers with incomes up to $500,000; the limit and income threshold are further increased by 1 percent annually in tax years 2026 to 2029. In 2030, the limit reverts to $10,000 for all filers, DiNapoli pointed out.

In tax year 2023, more than 1.5 million New York residents itemized deductions and included deductions for state and local taxes paid under the state personal income tax; 76 percent reported tax payments in excess of the $10,000 federal cap.

Of these taxpayers, nearly all with incomes under $100,000 will be able to fully deduct their SALT payments under the temporary, higher limit, and over 87 percent of those with incomes between $100,000 and $500,000 will as well. However, for over 445,000 of these filers, the higher federal standard deduction will likely provide a larger tax benefit, the report found.

The NYS Comptroller report found that other benefits for middle and low income New Yorkers are also set to expire.

Taxpayers with children will see limited relief from the increase in the child tax credit to $2,200 per child starting in tax year 2025. The credit will be indexed to inflation after 2025. There is also a refundable portion of the tax credit, which was reduced under the new law and will no longer be indexed to inflation, reducing the benefit for lower income taxpayers, the study found.

In tax year 2022, nearly 2.1 million New York taxpayers claimed $6.1 billion in federal child tax credits, $1.8 billion of which was refundable.

The study concluded that this will have an outsized effect on the middle class.

For taxpayers who pay for childcare, the nonrefundable credit as a share of these expenses was increased for those with incomes less than $105,000. However, the maximum amount of expenses eligible for the credit remains unchanged at $3,000 for one child and $6,000 for two or more, failing to address the rising cost of childcare for most families, DiNapoli said, The average cost of childcare for one child in New York in 2023 was nearly five times the $3,000 cap allowed for the credit. In tax year 2023, nearly 310,000 resident New York taxpayers claimed the federal child and dependent care credit, just 3.3 percent of total filers; the largest number of claimants were those with incomes over $105,000.

You can read the full NYS Comptroller's report here: DiNapoli: Recently Enacted Federal Tax Provisions Disproportionately Benefit Those With Higher Incomes.