NY State Income Tax Brackets

[xenondrn]

I am having trouble understanding how Turbotax calculates NY state tax. On the state summary screen I see the below numbers.

Income

Amount we start with for New York=$199,239

Standard deduction=- $8,000

Amount taxed by New York= $191,239    

Taxes

Starting amount=$12,258

I can't understand how Turbotax came up with 12,258. My understanding is that NY state uses progressive tax bands. Using the tax rate schedule given on page 63 here (https://www.tax.ny.gov/pdf/current_forms/it/it203i.pdf#page=63), this number should have been $11,739. It is almost like Turbotax is using the marginal tax rate of 6.41% on the entire amount ($191,239) as opposed to using progressive tax bands.

Am I missing something here?

[DawnC · Accepted solution]

What is your NY filing status?   You linked to page 63 of the IT-203 instructions, but for Adjusted Gross Incomes over $107,650, you have to use the tables on pages 64-66 which depend on your filing status.  Also, those worksheets use both Adjusted Gross Income (Line 32) and Taxable Income (Line 37) to compute the tax.   So, make sure you are using the correct line number and correct worksheet when figuring the tax.   

[xenondrn]

Thank you. My NY filing status is Single. Now that you pointed out the AGI over 107,650 requiring to use the tables on pages 64-66, it makes sense. Basically this means if income is over 107,650, progressive tax brackets aren't used. Instead, all of the taxable income is taxed at the marginal rate, which sounds unusual but at least matches the document.

One thing that still confuses me though is that on page 63, the tables show what the tax would be for incomes over 107,650 even though those tables shouldn't be used for incomes over 107,650. Is there any reason for that?

[JohnW152]

There’s no good reason that shows itself in the return instructions. 

It could just be to show how the tax brackets break down.  The IRS does the same thing in its Tax Rate Schedules in the Instructions for Forms 1040 & 1040-SR.

[xenondrn]

Right, but it makes sense for the IRS since they don't phase out progressive tax brackets over a certain income, so the tables are actually valid. For NY it just looks wrong.

There is very little online information on how NY taxes all taxable income using the marginal tax bracket over $107,650.  This means you will actually have more net income if you earn $107,600 instead of $107,700.