New York Advisory Opinion TSB-A-85 (4)I: Can a nonresident who works entirely in New York but lives in another state deduct alimony payments to a New York-resident ex-spouse on his New York personal income tax return?

Plain-English summary

Accountant Larry Shrank asked on behalf of a client - a New Jersey resident who works exclusively in New York, deriving all of his income from New York sources - whether the client could adjust his New York taxable income for alimony he pays to his ex-wife, who lives and works in New York and reports the alimony as her own income.

The Department first explained its older position: Tax Law § 632(b)(1)(B) limits a nonresident's deductions to items derived from New York sources, and alimony payments don't relate to producing New York income, so the Department had disallowed alimony adjustments for nonresidents entirely.

That changed with Friedsam v. New York State Tax Commission. The Court of Appeals traced the problem to the Federal Tax Reform Act of 1976, which reclassified alimony from an itemized deduction into an above-the-line adjustment to income, benefiting anyone who takes the standard deduction as well as itemizers. Because New York residents' starting point (federal adjusted gross income) already reflects that federal alimony adjustment, residents got the benefit automatically. Nonresidents didn't, because their New York income calculation applies source restrictions to deductions and, at the time, only allowed alimony as an itemized deduction under the old § 635(c). To fix that disparity, the Court of Appeals held nonresidents must also get an alimony adjustment to income.

Following Friedsam, the Department developed a computation method in TSB-M-85-(7)-I: a nonresident's alimony adjustment equals the alimony paid, multiplied by the ratio of (a) total New York-source income (excluding the alimony) to (b) total income from all sources (also excluding the alimony). Because Shrank's client derived all of his income from New York sources, that ratio came out to 1-to-1, entitling him to deduct the full alimony amount paid.

What this means for you

Nonresidents paying alimony while working in New York

You are entitled to an alimony adjustment to your New York income, not just an all-or-nothing denial. The amount is prorated using the ratio of your New York-source income to your total income from all sources (excluding the alimony from both figures) - so if all your income is New York-source, you can deduct the alimony in full.

Nonresidents whose income comes from multiple states

Expect your alimony adjustment to be prorated down from the full payment, in proportion to how much of your total income is New York-source versus earned elsewhere - only 100%-New-York-source taxpayers get the full deduction under this formula.

Accountants preparing nonresident New York returns involving alimony

Apply the TSB-M-85-(7)-I ratio method rather than assuming the old blanket disallowance still applies (that position was overturned by Friedsam) or assuming the full federal alimony adjustment carries over automatically (it doesn't for a nonresident - it must be prorated by the New York-source income ratio).

Common questions

Q: I'm a nonresident who pays alimony and works only in New York - can I deduct it on my New York return?
A: Yes. Following the Friedsam decision, nonresidents are entitled to an alimony adjustment to income. Since all your income is New York-source, the ratio-based formula in TSB-M-85-(7)-I lets you deduct the full amount paid.

Q: Why did the Department previously deny alimony deductions to nonresidents?
A: Because Tax Law § 632(b)(1)(B) limits a nonresident's deductions to items derived from New York sources, and alimony isn't connected to producing New York income - so under the old reading, it simply didn't qualify.

Q: How is the alimony adjustment calculated if my income comes from more than one state?
A: Under TSB-M-85-(7)-I, you multiply your alimony paid by the ratio of your New York-source income (excluding alimony) to your total income from all sources (also excluding alimony) - so the deduction is prorated based on how much of your income is connected to New York.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a85_4i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85 (4) I
Income Tax
June 6, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. I841206A

On December 6, 1984, a Petition for Advisory Opinion was received from Larry Shrank, 1
Skytop Road, Edison, New Jersey 08820.
Petitioner raises the issue of whether a nonresident taxpayer is entitled to make an adjustment
for payment of alimony in his New York State Personal Income Tax Return.
Petitioner is an accountant who provides tax assistance to a client who lives in New Jersey
and works exclusively in New York. Ail of Petitioner's client's income is derived from New York
State sources. On or about January 1, 1983, Petitioner's client was divorced. His client's ex-wife both
lives and works in New York State and includes the amount of alimony payments in her income.
Petitioner's client has not previously made an adjustment to income for alimony for purposes of New
York State income tax.
Section 632 of the Tax Law defines New York adjusted gross income for nonresidents as
follows:
“(a)

General - The New York adjusted gross income of a nonresident individual shall be
the sum of the following:

(1)

The net amount of items of income, gain, loss and deduction entering into his federal
adjusted gross income, as defined in the laws of the United States for the taxable
year, derived from or connected with New York sources . .

(b)

Income and deductions from New York sources.

(1)

Items of income, gain, loss and deduction derived from or connected with New York
sources shall be those items attributable to:

(B)

a business, trade, profession or occupation carried on in this State."

In applying this section, the Department has disallowed alimony adjustments for nonresidents
because the language of the statute requires deductions to be derived from New York sources.
Alimony does not relate to the production of New York income.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85 (4) I
Income Tax
June 6, 1985

A recent decision by the New York Court of Appeals, however, has altered the Department's
policy with respect to alimony adjustments for nonresident taxpayers. In Friedsam v. New York State
Tax Commission, 470 NYS 2d 848, the Court of Appeals held that New York State must allow
nonresidents an alimony deduction as an adjustment to income in the same manner that it was
previously allowed as an itemized deduction under Section 635(c). The reasoning behind this
decision is based on the differential effect the Federal Tax Reform Act of 1976 had on deductions
permitted by New York residents and nonresidents. Under the Federal Tax Reform Act of 1976, the
status of alimony payments was charged from an itemized deduction to an adjustment to income so
as to benefit both taxpayers who take standard deductions and those who itemized their deductions.
New York residents benefited from this charge insofar as payment of New York State taxes were
concerned since the starting point for computing New York adjusted gross income under s 612(a)
is federal adjusted gross income which already incorporates the alimony deduction. Nonresidents,
on the other hand, were not afforded the same benefit since § 632(b)(1)(B) places New York source
restrictions on deductions in computing adjusted gross income and § 635(c) only allows alimony as
an itemized deduction. To equalize this disparity, the Court of Appeals declared that nonresidents
be given an alimony adjustment the same as New York residents.
In the aftermath of the Friedsam decision, the Department has developed a method for
computing the alimony adjustment for nonresidents. The computation allows nonresidents an
adjustment to income for alimony paid based on the ratio of total New York income from New York
sources, excluding alimony paid, to total New York income from all sources, excluding alimony
paid. (TSB-M-85-(7)-I) Once the ratio is calculated, the alimony payment is multiplied by the ratio
to determine the amount of the deduction. In the case at hand, Petitioner's client would be entitled
to a deduction based on the above formula. Moreover, to the extent the client's income from all
sources in equivalent to that derived from New York sources. Petitioner's client would be entitled
to deduct the full amount of alimony paid.

DATED: May 17, 1985

FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.