New York Form CT-225 Instructions Explained
This guide clarifies the process for filing Form CT-225, helping you reconcile federal and state income for an accurate New York tax return.
New York State tax law has provisions that differ from federal regulations, which means your federal adjusted gross income often needs to be adjusted for your state return. Form IT-225, New York State Modifications, is used to make these adjustments. The form ensures that income and deductions are treated according to state-specific rules. You use it to report items that New York taxes but the federal government does not, and vice versa, to calculate your correct New York adjusted gross income.
Who Must File Form IT-225
You must file Form IT-225 if your income or deductions are treated differently for New York State versus federal tax purposes. This applies if you have additions or subtractions to your federal adjusted gross income that lack a dedicated line on your primary state tax return. Common situations that require filing include receiving interest from bonds issued by states other than New York or making contributions to a New York 529 college savings plan.
The filing requirement also extends to individuals with certain retirement income. If you are a New York State or local government employee, your mandatory 414(h) retirement contributions, which were deducted from your pay for federal purposes, must be added back to your income. Taxpayers receiving pension or annuity income may also need to file to claim the New York pension and annuity income exclusion. You will also need to use this form if you have income from partnerships or S corporations with New York modifications.
Information Needed to Complete Form IT-225
To complete Form IT-225, you will need your federal tax return and specific financial documents for your modifications. The official form and its instructions can be downloaded from the New York State Department of Taxation and Finance website.
Have the following documents ready:
- A copy of your completed federal tax return
- Form 1099-INT statements for reporting interest income
- Form 1099-R statements for claiming the pension and annuity exclusion
- Annual statements from New York’s 529 College Savings Program detailing your contributions
Guide to New York Addition Modifications
New York addition modifications increase your federal adjusted gross income. These adjustments account for income that New York State taxes but the federal government does not. A common addition is interest income from bonds issued by states other than New York or their political subdivisions. While this income is exempt from federal tax, New York requires you to add it to your income, entering the total on the designated line in Part 1 of the form.
Another addition applies to certain public employees. If you are a New York State or local government employee, your mandatory 414(h) retirement contributions, which reduce your federal income, must be added back for New York tax purposes. Similarly, federally-deducted contributions made by a federal employee to buy back service credit must also be added back on the form.
Guide to New York Subtraction Modifications
Subtraction modifications reduce your federal adjusted gross income, which lowers the amount of income subject to New York State tax. Common subtractions include:
- The pension and annuity income exclusion, which allows taxpayers age 59½ or older to exclude up to $20,000 of federally taxed income from sources like private pensions, IRAs, and government pensions.
- Contributions to New York’s 529 College Savings Program, up to $5,000 for an individual or $10,000 for a married couple filing jointly.
- Interest income from U.S. government bonds, which is federally taxable but exempt from New York State tax.
- Certain Social Security benefits that were included in your federal adjusted gross income may also be subtracted depending on your income level.
How to Submit Form IT-225
Form IT-225 is not filed as a standalone document; it must be attached to your primary New York State income tax return. For full-year residents, this is Form IT-201, and for nonresidents or part-year residents, it is Form IT-203. The total additions and subtractions calculated on Form IT-225 are transferred to specific lines on your main return.
The submission method depends on how you file your taxes. If you e-file with tax software, the program will generate and attach Form IT-225 to your electronic submission. For paper filers, you must physically attach the completed Form IT-225 behind your main tax form.