Do Long Island Residents Pay New York City Tax?
Your NYC tax liability as a Long Island resident depends on more than just your address. Learn how your specific work situation affects what you actually owe.
The tax obligations for Long Island residents concerning New York City can be confusing, especially for commuters, new residents, or those with remote work arrangements. This article clarifies these obligations by examining the definitions of residency, the tax implications for non-residents working in the city, and other applicable regional taxes.
Defining Residency for NYC Tax Purposes
To determine your tax obligations, you must first establish your residency status. Geographically, Long Island includes the NYC boroughs of Brooklyn and Queens, making their inhabitants NYC residents for all tax purposes. In contrast, residents of Nassau and Suffolk counties, which are also on Long Island but not part of NYC, are generally not considered city residents.
New York City uses two primary tests to establish tax residency. The first is the domicile test, which centers on where you intend to have your permanent home. Your domicile is the one place you consider your true home and to which you intend to return after being away. It is based on factors like where your family lives, where you vote, and where you maintain personal and financial ties. An individual can only have one domicile at any given time.
The second test is for statutory residency. An individual is considered a statutory resident of NYC if they maintain a “permanent place of abode” in the city for substantially all of the taxable year (generally defined as a period exceeding 10 months) and spend more than 183 days of the tax year there. A permanent place of abode is a dwelling suitable for year-round use that you maintain, whether you own it or not. For the 183-day count, any part of a day spent in the city counts as a full day, placing the burden of proof on the taxpayer to track their time.
NYC Income Tax for Non-Residents
Generally, individuals who live in Nassau or Suffolk counties and are not considered residents of New York City do not pay NYC personal income tax, even if they commute into the five boroughs for work. Their income is, however, subject to New York State income tax.
A notable exception applies to employees of the City of New York. Under the New York City Charter, non-resident city employees hired on or after January 4, 1973, are required to pay an amount equivalent to the city income tax they would owe if they were residents. This requirement applies to many municipal workers, such as police officers, firefighters, and teachers, who live outside the five boroughs.
The Convenience of the Employer Rule
Remote work arrangements for non-residents are governed by New York State’s “convenience of the employer” rule. This is a state-level doctrine and does not subject non-residents to New York City income tax.
The rule is used to determine if wages earned by a non-resident of New York State, who works remotely for a New York-based employer, are subject to New York State income tax. The doctrine states that if an employee works from an out-of-state location for their own convenience, rather than as a necessity of their employer, those workdays are treated as if they were performed at the employer’s New York office. Consequently, income earned on those days is subject to New York State tax.
Employer necessity can be established if the company has no physical office in New York or if the role requires being based at a specific out-of-state location. The taxpayer has the burden of proof to show the remote arrangement is an employer requirement.
Other Relevant NYC and Regional Taxes
Long Island residents may encounter other taxes related to New York City, such as the Metropolitan Commuter Transportation Mobility Tax (MCTMT). This tax is imposed on the net earnings from self-employment for individuals working within the Metropolitan Commuter Transportation District (MCTD). The MCTD includes the five boroughs of NYC and the counties of:
- Nassau
- Suffolk
- Westchester
- Rockland
- Putnam
- Orange
- Dutchess
The MCTMT applies to self-employed individuals, including partners, whose net earnings from work within the district exceed $50,000 for the tax year. The tax is a flat percentage of these net earnings. This is a separate tax from state and city income taxes and is calculated and paid differently.
Another tax to consider is sales tax. The rule for sales tax is straightforward: the tax is paid based on the point of purchase, not the residence of the buyer. This means a Long Island resident who buys goods or taxable services in Manhattan will pay the combined New York City and New York State sales tax rate at the time of the transaction. The total sales tax rate in NYC is 8.875%, which includes the state’s 4% rate, the city’s 4.5% rate, and a 0.375% Metropolitan Commuter Transportation District surcharge.