Just because you’ve moved from New York to Texas doesn’t mean you’re done filing New York tax returns. If you have New York source income, you must file a nonresident return and pay tax on that income. Understanding what constitutes NY source income and your filing obligations is essential to staying compliant.
Who Must File a NY Nonresident Return
You must file Form IT-203 (Nonresident and Part-Year Resident Income Tax Return) if:
- You were a New York resident for part of the year and a nonresident for part of the year, OR
- You were a nonresident for the entire year but had NY source income exceeding the filing threshold
Filing Thresholds for Nonresidents
You must file a NY nonresident return if your NY source income exceeds:
- $4,000 for single filers
- $8,000 for married filing jointly
- Any amount if you had NY withholding and want a refund
What Is New York Source Income?
NY source income includes:
1. Wages and Salary
- Compensation for services performed in New York
- Allocated based on days worked in NY vs. other locations
- Subject to “convenience of the employer” rule for remote workers
2. Business Income
- Income from a business, trade, or profession conducted in NY
- Allocated based on NY activity vs. total activity
- Includes self-employment income from NY clients or projects
3. Rental Income
- Income from NY real property
- 100% NY source, regardless of where you live
4. Sale of Real Property
- Gain from sale of NY real estate
- 100% NY source
- Subject to withholding requirements
5. Partnership and S Corporation Income
- Distributive share of income from NY-based partnerships or S corps
- Allocated based on the entity’s NY activity
6. Gambling Winnings
- Winnings from NY casinos, racetracks, or lottery
- 100% NY source
7. Deferred Compensation
- Compensation earned while working in NY but paid after you move
- Sourced to NY based on where you worked when you earned it
What Is NOT New York Source Income
- Interest and dividends (unless from a NY business)
- Capital gains from stocks and bonds (unless from a NY business)
- Pension and IRA distributions (if you’re a nonresident when distributed)
- Social Security benefits
- Unemployment compensation from other states
- Wages for work performed entirely outside NY
The Convenience of the Employer Rule
This is New York’s most controversial sourcing rule. If you:
- Work remotely from Texas
- For a NY-based employer
- For your own convenience (not employer’s requirement)
New York treats your wages as NY source income, even though you’re physically in Texas. You’ll owe NY tax on this income with no credit from Texas (because Texas has no income tax).
Example:
- You move to Texas but keep your job with a NY company
- You work remotely from home in Texas
- Salary: $200,000
- NY taxes the full $200,000 as NY source income
- You pay ~$21,800 in NY tax despite living in Texas
Challenging the Convenience Rule
You can avoid the convenience rule if:
- Your employer requires you to work from Texas (get this in writing)
- Your employer has a bona fide Texas office where you work
- Your position necessitates being in Texas (e.g., managing Texas operations)
The burden is on you to prove the employer’s necessity.
Part-Year Resident Returns
In the year you move, you’ll file as a part-year resident:
- Report all income (worldwide) for the period you were a NY resident
- Report only NY source income for the period you were a nonresident
- Allocate income between resident and nonresident periods
Example:
- You moved from NY to TX on July 1, 2025
- Salary: $200,000 ($100,000 earned in each half of the year)
- Rental income from NY property: $24,000 (all year)
Your NY return reports:
- Jan 1 – June 30 (resident period): $100,000 salary + $12,000 rental = $112,000
- July 1 – Dec 31 (nonresident period): $12,000 rental income only
- Total NY taxable income: $124,000
Withholding Requirements
If you have NY source income:
- Your employer should withhold NY tax
- If you’re self-employed, make estimated tax payments to NY
- Rental income may require estimated payments
- Sale of real property triggers mandatory withholding (typically 8.82% of sale price)
Credits for Taxes Paid to Other States
If you pay tax to both NY and your resident state on the same income:
- Your resident state should give you a credit for NY tax paid
- But Texas has no income tax, so there’s no credit available
- You effectively pay NY tax with no offset
Common Filing Mistakes
Nonresidents often:
- Fail to file NY returns when they have NY source income
- Incorrectly allocate income between NY and other states
- Don’t report rental income from NY property
- Forget about deferred compensation sourcing rules
- Claim they’re nonresidents when they’re actually statutory residents
Estimated Tax Payments
If you have significant NY source income and no withholding:
- Make quarterly estimated tax payments to NY
- Use Form IT-2105 (Estimated Tax Payment Voucher)
- Payments due April 15, June 15, September 15, January 15
- Underpayment penalties apply if you don’t pay enough
Record Keeping
Maintain documentation supporting:
- Your allocation of wages between NY and other states
- Days worked in each location
- Employer’s requirement (or lack thereof) for remote work location
- Rental income and expenses
- Business income allocation
How Long Must You File?
You must file NY nonresident returns for as long as you have NY source income. This could be:
- Forever (if you own NY rental property)
- Several years (if you have deferred compensation)
- One year only (if you have no ongoing NY income)
Our Nonresident Filing Service
We prepare NY nonresident returns for clients who have:
- Relocated to Texas but have ongoing NY income
- Rental property in New York
- Deferred compensation from NY employment
- Business income from NY clients
- Partnership or S corp income from NY entities
We ensure proper income allocation, maximize deductions, and minimize your NY tax liability while maintaining compliance.
