Tax Tip

3 Tax Benefits for New York Veterans

Current and former members of the military are eligible for certain tax exemptions.

“These exemptions and credits are one small way we can show our gratitude to the brave and dedicated individuals who currently serve or have served in our military,” said Acting Commissioner of Taxation and Finance Nonie Manion in a 2017 press release.

Photo by Benjamin Faust on Unsplash

Photo by Benjamin Faust on Unsplash

In today’s post, we’ll examine a handful of the exemptions available for New York veterans.

Property Tax 

As many as half a million New York veterans benefit from property tax exemptions, many of which are offered by local governments.

Depending on the circumstance, the property tax burden of a wartime veteran could be up to 15% or even as high as 25% if the veteran serves in a combat zone.  Cold War veterans (between 1945 and 1991) could see up to 15% in exemptions.

If the veteran was disabled in the line of duty, they could see up to 50% off in exemptions.

How do these property tax exemptions work?

In September 2017, Gov. Cuomo signed a bill that allowed the 679 school districts the option to allow exemptions for Cold War veterans for the entirety of the time the veteran owns the property. Prior, it was 10 years.

To find out which of these exemptions applies to you, you’ll need to contact your local assessor’s office. Visit NYS’s Municipal Profiles website to get the contact information you need.

Military Pay  

If your permanent home was in NYS before you entered the military, you don’t have to pay income tax on your active-duty pay. But it isn’t quite that simple.

You have to meet ALL three of the following conditions:

  • Didn’t have a permanent home in NY

  • Maintained a permanent abode outside of NY (this excludes military quarters like barracks, BOQ, etc.)

  • Spent less than 30 days in New York during the year

Basically, you need have not lived in New York almost at all for the entirety of the year to be eligible for this perk. You also had to be living somewhere off-base/ship to not owe income taxes.

Hire a Veteran Credit 

There are two types of hire a veteran credit. They are:

  • Corporations subject to franchise tax

  • Individuals, estates and trusts under personal income tax laws

This credit applies if you or your business:

  • Hires a qualified veteran before January 1, 2020

  • Employees the qualified veteran for 35 hours

If the veteran is disabled, the credit is 15% of the total wages paid during the first full year of employment. That amount can’t exceed $15,000 per veteran.

If the veteran isn’t disabled, the credit is10%  of the total wages paid during the first full year of employment. For nondisabled veterans, the credit is capped at $5,000.

These are just a handful of the tax benefits, credits, and exemptions that veterans can take advantage of. Reach out to one of our tax professionals and we’ll ensure you’re getting the most tax benefits from your service.

 

6 FAQs About 529 College Savings Plans

College is a large expense and one worth planning for, especially if you want your future college graduate to start their lives with minimal debt. One common way to prepare for such an expense is to open a 529 college savings plan.

Photo by Ruijia Wang on Unsplash

Photo by Ruijia Wang on Unsplash

What is a 529 plan?

College savings 529 plans are state-sponsored savings accounts that offer both tax and financial aid benefits.

What states run a 529 program?  

Almost every state has a 529 program, each with different perks and benefits. You can pick based on perks and you don’t need to live in the state you opened the account in.

You can look at 529 plan options using this tool from SavingforCollege.com.

What are the two types of college 529 plans?

There are two types of 529 plans, they are:

  • College savings plans – This plan is similar to a Roth 401k or Roth IRA by allowing you to contribute after-tax income in the form of mutual funds and other types of investments. There are a number of investment options to choose from and the 529 account will go up and down and value according to those investment choices. The money is this account is available for tuition, books, and often housing.

  • College prepaid tuition-  This plan can be used to pre-pay all or part of the costs of an in-state public college education. Sometimes, they can be converted for use at private or out-of-state colleges.

What are the perks of using a 529 savings plan?

Each state provides slightly different incentives for its 529 programs. But some of the overall benefits include:

  • Large income tax breaks (for federal and often state taxes)

  • The donor stays in control of the account until its use

  • They’re low maintenance

When can you start them?

You can start one of these savings plans at any time. Most 529 programs are “set it and forget it” meaning the investments come straight out of your paycheck or bank account.

Where can I learn more about college 529 plans?

There are a lot of online resources for comparing and ranking different 529 programs. You can reference one of these, or reach out to your friendly neighborhood tax professionals. We can help you select the best option for you.

*Contact us here*

How The Tax Cuts and Jobs Act (TCJA) Affects Fantasy Sports

Fantasy sports is becoming increasingly popular, with 59.3 million people playing in the United States and Canada, creating a $7 billion industry. With this though, comes tax implications for winners.  The Tax Cuts and Jobs Act (TCJA) provides tax opportunities and drawbacks that fantasy players should understand.

9.3.19 blog picture

There is currently an ongoing debate how winnings should be classified and where they should be reported. Are the winnings considered gambling income or hobby income? The TCJA does not clarify the definition of gambling and to date the IRS has not weighed in as to whether fantasy sports winnings are hobby or gambling income. If fantasy sports are not considered gambling, then the hobby loss rules would apply. In this case, the TCJA eliminates the taxpayers’ ability to deduct any fantasy expenses even if there is fantasy income. Prior to the TCJA, hobby losses were deductible as miscellaneous deductions subject to the 2% adjusted gross income (AGI) floor.

Many have argued that fantasy sports are ‘wagering transactions’ thereby allowing fantasy sports losses to be deductible to the extent of their winnings. Previously, gambling losses were assumed to be the cost of placing the wager, but TCJA suggests that other expenses that are ordinary and necessary to execute wagering transactions are deductible. For traditional gamblers, this includes the ability to deduct expenses related to travel, lodging, etc., to the extent of winnings – but fantasy players may have different ‘ordinary and necessary’ expenses. Potentially deductible fantasy sports expenses under TCJA include: fantasy-related online subscriptions and magazines; cost of any office equipment/space exclusively dedicated to fantasy sports; 50% of food costs at fantasy sports draft parties; and cost of any punishments for losing in a fantasy sports league. Losses from other gambling activities, like traditional casinos, could also be used to offset fantasy sports winnings.

For casual fantasy players, the increase in the standard deduction under the TCJA will reduce the number of taxpayers that itemize, thereby eliminating any potential benefit of fantasy-related expenses, since the deductions allowed are classified as “other itemized deductions” on the schedule A.

For the serious fantasy player, treating gambling as a trade or business may be useful. It is important to remember that taxpayers who recognize profits on their schedule C will be subject to both income and self-employment taxes, so it may not always be beneficial to consider yourself a professional. In the case of the serious professional fantasy player, income and expenses will be reported on schedule C, negating the need to itemize in order to take advantage of the deductions.  The TCJA does have one downfall for professional gamblers; prior to the new tax law, gambling expenses such as travel and lodging were not considered gambling losses, which meant they were not limited to gambling winnings. This allowed professional gamblers to have a net loss on gambling activities. Under the TCJA, these expenses are defined as wagering losses, therefore are limited to the extent of gambling winnings. Those who identify themselves as professionals have the burden to prove their activity is regularly pursued full-time, and to produce a livable income. Taxpayers should expect to hear from the IRS when claiming to be a professional.

Whether a taxpayer is a professional or a casual player, it is very important to keep all records as the burden of proof is on the taxpayer. While gambling is reported on W-2G, fantasy sports sites typically issue 1099-Misc to players winning more than $600. The IRS suggested that the net method of reporting (reports winnings from contests less the entry fees for any contest won) was the appropriate way to calculate winnings, but not all fantasy sports sites comply. It is important for a taxpayer to know how the site they are using reports winnings.

In summary, under the TCJA, fantasy players may benefit by treating their fantasy sports as gambling and claiming fantasy-related expenses that were not previously deductible.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.