The PTET Election: Your Biggest Lever

New York’s Pass-Through Entity Tax is the single most valuable planning tool available to S-corp and partnership owners in the state. Here’s why it matters: the $10,000 SALT cap limits individual deductions for state and local taxes on your federal return. But when your entity elects into PTET, the business pays the state tax directly, and that payment is fully deductible at the entity level — bypassing the cap entirely.

For a partner or S-corp shareholder with $500,000 in pass-through income, the PTET election can save $30,000 or more in federal taxes. The election must be made by March 15 of the tax year through New York’s online portal, and estimated payments start on the same quarterly schedule as personal estimates. Miss the March deadline and you wait a full year.

Charitable Deductions and Timing

Bunching charitable donations works anywhere, but it hits differently in New York because of the high marginal rates. The idea is straightforward: instead of giving $15,000 every year, give $45,000 in one year and take the standard deduction in the other two. That single-year itemized deduction pulls more income below the top brackets.

Donor-advised funds make this simple. You contribute a lump sum, get the full deduction in year one, and distribute the money to charities on your own schedule. The IRS recognizes the deduction when the money enters the fund, not when it leaves. For New Yorkers in the top bracket, each $10,000 bundled this way saves roughly $5,200 in combined federal, state, and city taxes compared to spreading it out.

Roth Conversions Before Leaving New York

This one is specific to people planning a move out of New York — and we see it more often than you’d think. If you’re sitting on a large traditional IRA and you know you’re relocating to a no-income-tax state (Florida, Texas, Nevada), converting before the move means paying New York tax on the conversion amount now. That sounds counterintuitive.

But the math sometimes favors it. Converting in a year when your income is lower — maybe you’re between jobs or winding down a business — locks in a lower effective rate on the converted amount. Once the money is in a Roth, it grows tax-free and comes out tax-free. If you wait until you’re in Florida, you skip the state tax on the conversion itself, but you’ve also lost the planning window if your income spikes in the new state. The right answer depends on your specific numbers, and we run both scenarios for clients before recommending either path.

Max Out Your Retirement Accounts First

This advice applies everywhere, but it saves more per dollar in New York than in most states. A $23,000 contribution to a 401(k) in 2025 saves a New York City resident about $9,200 in combined taxes (37% federal + 10.9% state + 3.876% city, assuming top brackets). The same contribution in a no-income-tax state saves $8,510. That $690 difference adds up over a career.

If you’re self-employed, a Solo 401(k) or SEP-IRA lets you shelter up to $69,000 in 2025 ($76,500 if you’re 60–63). Pair that with the PTET election and you’re stacking two of the best tools available.

The New York City Unincorporated Business Tax

Sole proprietors and single-member LLCs operating in NYC owe the Unincorporated Business Tax — a 4% tax on net income above $95,000. A lot of freelancers don’t find out about UBT until they get a notice. If your business earns enough to trigger it, electing S-corp status or restructuring as a partnership can eliminate or reduce the UBT exposure. That restructuring has its own costs and requirements, so it only makes sense above certain income thresholds — typically $150,000 or more in net business income.

What Doesn’t Work

New York is aggressive about residency audits. Claiming you moved to Florida while keeping a Manhattan apartment, a New York driver’s license, and your kids in a New York school will trigger an audit — and you’ll lose. The state uses a 548-day test along with a “domicile” analysis that examines where your life is actually centered. We’ve seen clients spend more fighting a residency audit than they would have paid in taxes.

Also: setting up an LLC in Wyoming or Delaware doesn’t change your New York tax obligations. If you live and work in New York, you owe New York tax regardless of where your entity is organized. The internet is full of bad advice on this one.