The State of New York has found a way to help raise money for the tax deficit they are facing. If you own a second home or a vacation home in New York State, you are now subject to state income tax on your income up to 35%. Can you afford that?
A New York court ruled last month that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million.
Income that now could be taxed by New York includes capital gains, dividends and securities, attorneys said. In the event of an audit, these homeowners would also be responsible for back taxes, plus interest and penalties, as a result of their New York property.
Judge Joseph Pinto, a New York administrative law judge, made the novel ruling in a 2009 case that was affirmed last month on appeal by the New York state tax appeals tribunal. Mr. Pinto seized on what is meant by a permanent residence, which is the benchmark for whether all, or just the in-state portion, of an individuals income is subject to New York state tax.
Judge Pinto ruled that the couple's Long Island vacation home qualifies under the law as a permanent abode because it was suitable for living year-round--whether or not the couple actually stayed in the home wasn't relevant. Under the ruling, if an owner doesn't spend a single a day in a home it could still count toward a permanent residence.
A spokesman for the state Taxation Department issued a written statement that said it was "pleased" with the decision. "However, these cases are fact-intensive and as such each case stands on its own specific fact pattern," it said.
For years, New York law stated that residents of another state who spend more than 183 days a year in New York have to pay taxes on any income they make in this state. But they generally haven't had to pay New York taxes on income they make outside of the state or on their spouses' income if they work elsewhere.
Under the recent ruling, this might change for many out-of-state residents who own vacation homes or apartments here. In effect, it reinterprets what counts as a permanent residence.
In defining a "permanent place of abode," New York tax code specifically excludes "a mere camp or cottage, which is suitable and used only for vacations." New York tax experts say the new ruling is the first they recall that counts summer homes as permanent residences.
Is your state next? This law MUST be stopped in it’s tracks. It will KILL the real estate market in New Your and it will KILL the real estate market in your area if it is allowed to stand. Call your state rep and tell them “Not in our Sate”...
Just think, you live in Texas and you have a vacation home in the Hampton's. You are now subject to a state income tax from New York of up to 35% of ALL of your earnings.... Just because you own a vacation home in New York State...
To end on a positive note, real estate in New York just got cheaper.... Oh, that’s not a good thing is it????
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