How to get city tax credit for RSU granted in CA and vested in NYC?

[nyc_taxpayer]

I have RSUs granted when I was in CA years ago. Later I moved to work in NYC, where the RSU was vested. NY state and NYC taxed my RSU based on its full face value.

From Turbo tax, I can attribute a portion of the RSU as income sourced in CA and pay CA state tax, such that I am getting tax credit from NY state tax.

However, I don't see a way I can receive similar tax credit from NYC city tax. Is there any way we can get tax credit from the NYC city tax just as we can from NY state tax? Thanks!

[GeorgeM777]

No, there is no way to claim a credit against your New York City tax.  With the exception of the states that allow for reciprocity, the individual states allow their residents credits against taxes paid to other states because, if that was not allowed, then two jurisdictions would be taxing the same income.  New York City (and the city of Yonkers) impose their own tax on their residents which is separate and apart from the tax imposed by New York State.  

@nyc_taxpayer

[nyc_taxpayer]

Thanks for the information. I have another related question. Suppose I leave NY state for another state, let's say FL. For the RSU granted in CA and vested in FL, does NY state still tax it? does NYC still tax it?

[GeorgeM777]

That depends on whether, under New York law, you are a resident, part-year resident or non-resident with NY source income.  Even if you relocate to Florida, NY will continue to tax your income if you continue to be resident, part-year resident, or a non-resident with NY source income.  Thus, for tax purposes, it's important to understand NY's residency rules.  

Generally, you are considered a New York State resident for income tax purposes if you are domiciled in the state. For most people this is straightforward: the primary residence where you live is both your state of domicile and the state in which you are a resident for tax purposes. However, you can still be considered a resident of New York State for income tax purposes even if you are not domiciled in the state. 

In general, your domicile is your permanent and primary residence that you intend to return to and/or remain in after being away (for example, on vacation, business assignments, educational leave, or military assignment).

Residence means a place of abode. An individual may have several residences—e.g., houses, apartments, condos, and/or other places to live or physical dwellings in which they reside—and some may be in different states.

While you may have multiple residences, you can only have one domicile. An individual may live in a certain residence for a temporary period of time, which could be an extended period of time, but if it’s not the place they ultimately attach themselves to and intend to return to, it’s still not their domicile.

So, let's say you relocate to FL.  Can NY still tax your RSU's?  No, if you have made FL your domicile.  But there is one situation when even if your domicile may be in FL that you could still be subject to NY taxes.  The NY Department of Taxation and Finance addressed this question as follows:

Can I be a resident of New York State if my domicile is elsewhere?

You may be subject to tax as a resident even if your domicile is not New York.

You are a New York State resident if your domicile is New York State OR:

• you maintain a permanent place of abode in New York State for substantially all of the taxable year; and
• you spend 184 days or more in New York State during the taxable year. Any part of a day is a day for this purpose, and you do not need to be present at the permanent place of abode for the day to count as a day in New York.

In general, a permanent place of abode is a building or structure where a person can live that you permanently maintain and is suitable for year-round use. It does not matter whether you own it or not.

FAQs from the NY Department of Taxation and Finance

Therefore, if FL does become your domicile and the above guidance from the NY Department of Taxation and Finance does not apply to you, then NY cannot tax your RSUs.  Keep in mind there could be some allocation that needs to be made based on your time in NY.  

@nyc_taxpayer

[nyc_taxpayer]

Thanks for the all the details.

Let's say I move to FL and become a non-resident of NY state in 2013, and RSU is vested when I am in FL. Since there is a period of time I stayed in NYC  from the RSU was granted (in CA) until it is vested (in FL), I assume that I need to do some allocation and attribute some portion of the RSU to be NY sourced income and pay NY state tax for it.

My question is, do I need to do the same allocation and pay city tax for NYC?

[GeorgeM777]

Yes, if you were a resident of New York City, then you will need to make an allocation.  New York City will tax all NYC resident income no matter where it is earned.  In contrast, non-residents of New York City are not subject to New York City personal income tax.  

The rules that govern whether you are a New York City resident are the same as the rules for New York State residency.  Below is information from NY Department of Taxation and Finance relating to New York City residency/domicile.

The rules regarding New York City domicile are also the same as for New York State domicile. If your permanent and primary residence that you intend to return to and/or remain in after being away is located in one of the five boroughs of New York City, it is considered a New York City domicile.

Your New York City domicile does not change until you can demonstrate with clear and convincing evidence that you have abandoned your city domicile and established a new domicile outside New York City. Even if you live in a location outside of the city for a period of time, if it’s not the place you attach yourself to and intend to return to, it’s not your domicile. Your domicile will still be New York City and you will still be considered a New York City resident.

New York Department of Taxation and Finance

@nyc_taxpayer

[nyc_taxpayer]

Let me make sure I understand the rules for New York City Tax for RSU.

1) For RSU granted in CA (or any other states), but vested in NYC, I need to pay NYC city tax based on the full face value of the RSU, even though I also need to pay CA tax based on the allocated CA sourced value of the RSU.

2) After I leave NYC and move to FL and become a non-resident of NYC, for the RSU granted in CA and vested in FL, I need to pay NYC city tax based on allocation value of the RSU, because I was a NYC resident for some period of time before the RSU is invested.

Is my understanding correct?

[GeorgeM777]

Question 1.  No.  You would not pay tax on the full value of the RSUs, just on the percentage that can be reasonably allocated to the time you were a NYC resident.  The same would be true for California.  

Question 2. Yes.  As a NYC resident for a period of time, you would allocate the value of the RSUs to the time period you were a NYC resident.  The remaining value amount of the RSUs get allocated in part to CA and in part to FL.  

@nyc_taxpayer

[nyc_taxpayer]

Question 1 is exactly what I wanted to ask in my original post, where I said

"From Turbo tax, I can attribute a portion of the RSU as income sourced in CA and pay CA state tax, such that I am getting tax credit from NY state tax.

However, I don't see a way I can receive similar tax credit from NYC city tax. Is there any way we can get tax credit from the NYC city tax just as we can from NY state tax?"

Basically I don't see a way in TurboTax or from the NY state tax form that allows us to pay NYC tax only for the allocated amount of time I was in NYC. Can you let me know how to do this?

[GeorgeM777]

No.  The tax imposed by NYC on its residents is based on the resident's NYS taxable income.   After a taxpayer has calculated their NYS taxable income, NYS assesses a tax on that taxable income.  Thereafter, NYS allows certain credits to offset that tax liability such as the resident credit.  The resident credit is the credit that NYS allows it residents to claim as an offset against their tax liability if part of their NYS taxable income has already been taxed by another state.  After all the eligible credits have been claimed, the remaining amount, if any, is the resident's NYS tax.  

The resident credit may not decrease your NYS tax payable to an amount less than would have been due if the income sourced to and taxed by the other jurisdiction was excluded from your NY income.  

In contrast, NYC has no credit similar to the NYS' resident credit.  NYC calculates a resident's taxable income by beginning with the resident's NYS adjusted gross income, less the standard or itemized deductions, and less dependent exemptions, and the resulting number is the NYC taxable income.  NYC does allow some credits to offset a resident's NYC tax liability such as the household credit, and the NYC non-refundable credit; however, there is no credit to offset taxes paid to another state/city.  

@nyc_taxpayer 

[nyc_taxpayer]

Thanks! That matches my understanding  of the NY state/city  income tax forms. Am I right in assuming your answer in this post is correcting what you said in the previous post, where you said,

"Question 1.  No.  You would not pay tax on the full value of the RSUs, just on the percentage that can be reasonably allocated to the time you were a NYC resident.  The same would be true for California."

This was addressing my question in a previous post where I asked,

"For RSU granted in CA (or any other states), but vested in NYC, I need to pay NYC city tax based on the full face value of the RSU, even though I also need to pay CA tax based on the allocated CA sourced value of the RSU."

Based on your answer in this post, which matches my understanding of the tax form, I AM paying NYC city tax based on the full face value of my RSU.

[GeorgeM777]

Yes, that's correct, and thank you for your careful review of these posts, and your analysis of NYS income tax rules as they relate to credits for taxes paid to other states, and further, how NYC taxes income of its residents.  

@nyc_taxpayer