New York allows certain subtraction modifications that can reduce your New York adjusted gross income and lower the amount of tax you owe. These subtractions are entered in the Subtractions From Income section of your New York return.
Path to this entry:
New York State Return > Subtractions From Income
What Is Included in the Subtractions From Income Section?
The New York Subtractions From Income section includes:
- New York 529 College Savings Program Deduction
- Certain Pension Income Excluded From New York Taxable Income
- Other Subtractions
- Disability Income Exclusion (IT-221)
- Depreciation Subtractions (IT-398 or IT-399)
These entries allow eligible taxpayers to reduce their New York taxable income.
New York 529 College Savings Program Deduction
If you contributed to a qualifying New York 529 College Savings Program account during the tax year, you may qualify for a deduction.
For 2026, New York generally allows a deduction of:
- Up to $5,000 for single, head of household, married filing separately, or qualifying surviving spouse filers
- Up to $10,000 for married taxpayers filing jointly
Only contributions made during the current tax year should be entered.
Certain Pension Income Is Excluded From New York Taxable Income
New York allows certain retirement income to be excluded from taxable income.
Path to this entry:
New York State Return > Subtractions From Income > Certain Pension Income Is Excluded From New York Taxable Income
Government Pension Income
You may be able to exclude taxable pension income received from:
- New York State retirement systems
- Local government retirement systems
- Federal government retirement systems
This includes many government pensions reported on Form 1099-R.
Other Pension and Annuity Income
If you were age 59½ or older, New York may allow an exclusion of up to $20,000 per taxpayer for qualifying retirement income.
Examples may include:
- Private pension distributions
- Annuity payments
- Certain deferred compensation distributions
- IRA distributions
- Other qualifying retirement income
Do not enter more than $20,000 per taxpayer.
What Information Will I Need?
You may need:
- Form 1099-R
- Pension statements
- Retirement account records
- Federal tax return information
Only enter pension income that qualifies for the New York exclusion.
Disability Income Exclusion (IT-221)
New York provides an exclusion for certain disability income through Form IT-221, Disability Income Exclusion.
Path to this entry:
New York State Return > Subtractions From Income > Disability Income Exclusion (IT-221)
Who May Qualify?
You may qualify if:
- You were permanently and totally disabled when you retired.
- You received disability income included in your federal adjusted gross income.
- You meet the eligibility requirements for the disability income exclusion.
This exclusion can reduce the amount of disability income subject to New York tax.
What Information Will I Need?
You may need:
- Form 1099-R
- Disability retirement statements
- Pension records
- Information needed to complete Form IT-221
How Does This Affect My Return?
The disability income exclusion may:
- Reduce New York adjusted gross income
- Reduce New York taxable income
- Increase your refund
- Reduce the amount of tax owed
Important Information
- Not all disability payments qualify.
- The income must generally be included in federal income before it can be excluded for New York purposes.
- Keep all supporting disability and retirement documentation with your tax records.
Other Subtractions
Select Other Subtractions to enter additional New York subtraction modifications.
Path to this entry:
New York State Return > Subtractions From Income > Other Subtractions
Many subtraction modifications are reported on Form IT-225, New York State Modifications, and apply only in specific situations.
These adjustments often apply to taxpayers with:
- Businesses
- Partnerships
- S corporations
- Estates or trusts
- Specialized investments
- Tax-favored income
In many situations, subtraction amounts will be provided on:
- Schedule K-1
- Estate or trust statements
- Prior-year New York schedules
- Form IT-225 worksheets
- Other supporting tax documents
Common Other Subtraction Types
The following subtraction modifications may be available when applicable:
- Build America Bond (BAB) interest
- Long-term residential care deductions
- Certain death benefits
- Contributions for the Executive Mansion
- Distributions and income related to victims of Nazi persecution
- Professional service corporation shareholder adjustments
- Gain from the sale of a qualifying new business
- Qualified Emerging Technology Investments (QETI)
- Adjustments related to assets acquired before January 1, 1960
- Income earned before 1960 and previously reported
- Living organ donor deductions
- Military combat pay
- Military nonresident pay
- New York Higher Education Loan Program (HELP) adjustments
- Certain investment income from U.S. obligations
- Railroad Retirement benefits
- New York tax-exempt investment income
- New York State Organized Militia income
- Loss from sale of estate tax property
- Native American income exclusions
- Special accrual adjustments
- Volunteer firefighter or ambulance worker length-of-service awards
- Student loans discharged due to death or permanent disability
- Certain taxable refunds
- Gains invested in qualified property
- Deductions related to cannabis production activities
S Corporation Adjustments
New York also provides subtraction categories for:
- S corporation pass-through income
- S corporation stock disposition adjustments
These amounts are generally provided by the S corporation on supporting schedules.
Fiduciary Adjustment
Beneficiaries of estates and trusts may receive subtraction modifications that must be reported as fiduciary adjustments.
These amounts are generally reported on estate or trust documentation.
Depreciation Subtractions (IT-398 or IT-399)
New York does not always follow the same depreciation rules used on your federal return. If you previously reported New York depreciation additions or maintain New York depreciation schedules, you may need to claim a depreciation subtraction.
Path to this entry:
New York State Return > Subtractions From Income > Depreciation Subtractions (IT-398 or IT-399)
When Is This Section Required?
Complete this section if:
- You are entitled to a New York depreciation subtraction.
- You previously reported a New York depreciation addition.
- You have property reported on Form IT-398 or Form IT-399.
Which Form Should I Select?
Form IT-398
Use Form IT-398 if the property was subject to federal bonus depreciation under IRC Section 168(k).
Examples include:
- Business equipment
- Machinery
- Computers
- Business vehicles
- Other assets that received federal bonus depreciation
Form IT-399
Use Form IT-399 if the adjustment relates to other New York depreciation differences not reported on Form IT-398.
Examples include:
- Property using a different New York depreciation method
- New York depreciation subtraction adjustments
- Assets previously reported on Form IT-399
What Types of Depreciation Subtractions May Be Reported?
Examples include:
- Special depreciation expenditures
- Safe harbor leases included in AGI
- Safe harbor leases excluded from AGI
- New York depreciation allowed
- IRC Section 168(k) depreciation adjustments
- Year-of-disposition adjustments for IRC Section 168(k) property
What Information Will I Need?
You may need:
- Prior-year Forms IT-398 or IT-399
- Federal Form 4562
- Depreciation schedules
- Asset purchase records
- Asset disposition records
- Business tax records
Important Information
- Most taxpayers will not need depreciation subtraction entries.
- Assets that generated a New York depreciation adjustment in prior years may require continued reporting until fully depreciated or disposed of.
- Use the same New York depreciation form previously used for the asset whenever possible.
- Keep all depreciation schedules and supporting records with your tax documents.
How Do These Subtractions Affect My Return?
Subtractions entered in this section may:
- Reduce New York adjusted gross income
- Reduce New York taxable income
- Increase your refund
- Reduce the amount of tax owed
The actual benefit depends on the type of subtraction and your individual tax situation.
Important Information
- Most taxpayers qualify for only a few subtraction modifications.
- Pension exclusions are entered separately from Other Subtractions.
- Disability income exclusions are reported through Form IT-221.
- Many subtraction modifications are reported through Form IT-225.
- Some subtractions require information provided by partnerships, S corporations, estates, or trusts.
- Depreciation-related entries may require Forms IT-398 or IT-399.
- Keep all supporting documentation with your tax records.
Additional Information
Before completing the Subtractions From Income section, gather any Forms 1099-R, Schedules K-1, trust statements, military income records, retirement income documents, depreciation schedules, and prior-year New York returns.
Many New York subtraction modifications depend on information reported on another tax document, so enter amounts exactly as shown on the supporting forms to help ensure your return is calculated correctly.