BILL NUMBER: S2571
SPONSOR: FELDER
 
TITLE OF BILL:
An act to amend the tax law, in relation to increasing the exemption for
pensions and annuities for certain persons
 
SUMMARY OF PROVISIONS:
Section 612(c)(3-a) of the Tax Law is amended to increase the amount of
private pension and annuity income that is exempt from New York State
income taxes. The current exemption level of $20,000 would be increased
to $25,000 for the 2025 taxable year, to $30,000 for the 2026 taxable
year, to $35,000 for the 2027 taxable year, and to $40,000 in the 2028
and subsequent taxable years.
 
EXISTING LAW:
Government pensions (state, local, federal, military) are fully exempt
from NYS income taxes. In contrast, only the first $20,000 of income
from private pensions and annuities is tax exempt.
 
JUSTIFICATION:
The current $20,000 tax exemption level for private pension income was
established in 1981, and has not been adjusted during the intervening 35
years. This bill provides a much needed update in the amount.
The exemption was enacted in 1981 in an effort to assist senior citi-
zens. The 1981 law also sought to help treat the recipients of private
pensions more fairly in comparison to the treatment of persons who
receive government pensions, which are fully exempt from state income
taxes pursuant to the State Constitution.
The 1981 law compromised on a tax exemption level of $20,000 for private
pensions. Based on the Consumer Price Index, the $20,000 level estab-
lished in 1981 would be the equivalent of more than $64,000 in 2023.
This bill would enact the first increase in the exemption threshold
since the law was passed in 1981. It would phase in the increase by
$5,000 per year to a maximum exemption of $40,000.
An updated exemption level will help address the inequity in the tax
treatment of private pensions and government pensions, which are tax
exempt under the State Constitution.
We all know that New Yorkers are overtaxed, over-ticked and over-fined.
This bill is another measure to make New York more affordable by reduc-
ing the tax burden for retirees. This is all the more important in light
of the recent federal tax reform law.
In addition, reducing the tax burden on older New Yorkers will help
encourage retirees to remain in New York State during their retirement
years. The increase will also enable older New Yorkers to keep more of
their income at a time when many find it difficult to return to the
workforce in order to supplement their income. Increasing the tax-ex-
empt amount may also encourage younger persons to save money for their
retirement in pensions, 401(k)s, IRAs, etc.
 
LEGISLATIVEHISTORY:
2015/2016: S.2903-Passed Senate.
2017/2018: S.414-Passed Senate.
2019/2020: S.697-Investigations and Government Operations Committee
2021/2022: S.3343-Investigations and Government Operations Committee
2023/2024: S.2047-Investigations and Government Operations Committee
 
EFFECTIVE DATE:
This act would take effect immediately.

Statutes affected:
S2571: 612 tax law, 612(c) tax law