Financial planning in New York
Two income taxes in the city, and an estate tax with a cliff.
Direct answer
New York State's income tax runs to 10.9%, and New York City residents pay a second income tax on top of it. The state is kinder to retirees than its rates suggest — Social Security is exempt, government pensions are fully exempt, and up to $20,000 of other pension and annuity income is excluded from age 59½ — but its estate tax is unusual: above 105% of the exclusion amount the credit disappears entirely, so an estate just over the line is taxed on the whole of it. For a New York household the estate cliff and the city tax are the two things no generic plan accounts for.
New York tax treatment
Figures are for tax year 2025, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.
For joint filers the 9.65% rate applies from $2,155,350 of taxable income, 10.3% above $5 million and 10.9% above $25 million, through 2027. New York City residents also pay a city income tax that runs from 3.078% to 3.876%.
Social Security is subtracted in full. Pensions from New York State, its local governments and the federal government are fully exempt, and from age 59½ up to $20,000 of other qualifying pension and annuity income is excluded per person.
The basic exclusion amount is $7,160,000 for deaths in 2025 and $7,350,000 for deaths in 2026. An estate that exceeds the exclusion by more than 5% receives no credit at all and is taxed from the first dollar, at rates reaching 16% above $10.1 million.
Worth doing here
Things that are worth doing in New York that would not be worth doing, or would work differently, somewhere else.
Because the credit vanishes once an estate exceeds 105% of the exclusion, an estate slightly over the line can owe several hundred thousand dollars more than one slightly under it. Lifetime gifts and charitable bequests that bring the estate back below the threshold are unusually valuable here.
Contributions to New York's 529 College Savings Program can be subtracted up to $5,000 a year, or $10,000 on a joint return. Contributions to other states' plans do not qualify.
From 59½ each spouse can exclude up to $20,000 of qualifying pension and annuity income a year. Retirement income that is drawn in a steady stream uses the exclusion in full; income taken in lumps wastes it.
Federal and state, together
State and city income tax together with property tax exceed the federal deduction cap for most New York City households by a wide margin, and above $500,000 of modified adjusted gross income the cap shrinks toward $10,000. Almost none of the state and city tax a high earner pays here is deductible federally.
The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).
Cities
Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.
New York's high earners are paid in ways that tax differently from a salary: deferred compensation and restricted stock at the banks and asset managers, partnership income at law and medical practices, and equity at the technology companies that have expanded here.
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Common questions
Social Security is exempt. New York State, local government and federal pensions are fully exempt, and up to $20,000 a year of other qualifying pension and annuity income is excluded from age 59½.
If an estate exceeds the basic exclusion amount ($7,350,000 for deaths in 2026) by more than 5%, it receives no credit and the whole estate is taxed, at rates up to 16%. Estates under the exclusion owe nothing; estates just over it can owe a great deal.
Yes. New York City levies its own resident income tax, at rates from 3.078% to 3.876%, on top of the state tax.
No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves New York households through a virtual planning relationship. This page describes the service area and does not claim a New York office.
Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.
Next step
A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.
