The Roth IRA in New York: What the State Taxes, Protects, and Runs for You

New York does not tax qualified Roth IRA withdrawals — the state conforms fully to the federal treatment, and neither NYC nor Yonkers taxes them either. Roth conversions are New York income in the year you convert, with one big exception: from age 59½, the state excludes up to $20,000 of conversion income per person per year. This guide covers that window, the real cost of converting (city tax included), the moving rule, creditor and estate protection, and the Roth IRA New York may have already opened for you.

How much can you convert state-tax-free? The $20,000 window

New York’s pension-and-annuity exclusion (Tax Law §612(c)(3-a)) lets anyone 59½ or older subtract up to $20,000 a year of private pension, annuity, and IRA income from New York income — and the state’s controlling guidance says conversion income counts. That turns the exclusion into a state-tax-free Roth conversion window that almost nobody prices in:

• It’s per person, computed separately. A married couple where each spouse converts from their own IRA can exclude up to $40,000 a year. One spouse’s unused window cannot transfer to the other — which makes keeping IRA balances in both names worth real money.
• The age test is exact, not annual. Only income received on or after the day you turn 59½ qualifies. A conversion the week before your half-birthday gets nothing; the week after, up to $20,000.
• The cap is shared. Private pension income, IRA withdrawals, and conversions draw from the same $20,000 — but Social Security and NYS/local/federal government pensions are separately and fully exempt, so they don’t consume it.
• It isn’t indexed. $20,000 since the 1990s. Bills to raise it (to $25,000–$40,000) exist but remain unenacted as of this page’s verification date.

Run patiently, the window compounds: a 59½+ couple converting $40,000 a year moves $200,000 over five years into Roth with zero New York tax — at NYC rates, that’s roughly $4,300 a year of avoided state-and-city tax, every year, forever short of a law change.

Authority: Form IT-201-I (2025), line 29; TSB-M-98(7)I · NY Tax Law §612(c)(3-a) · NY Tax Law §612(c)(3-a); Form IT-201-I (2025), line 29 · TSB-M-98(7)I; NY Tax Law §612(c)(3-a) · verified 2026-07-18

What a conversion actually costs in New York

Conversion income lands on top of your other income and runs through New York’s 2026 brackets (3.9%–10.9%, with the bottom five rates freshly cut a tenth of a point). Three New York–specific amplifiers change the math most calculators show:

• The $107,650 recapture. Above that income, New York claws back the benefit of the lower brackets over the next $50,000 — conversions through the $107,650–$157,650 band carry an effective state rate above the printed one, and past $157,650 the whole return computes at a flat 5.9% (until 6.85% starts at $215,400).
• NYC residents add 3.078%–3.876% on the same conversion income; Yonkers adds 16.75% of the NYS tax itself.
• Estimated tax is on you. NY withholding on IRA distributions is voluntary (Form IT-2104-P) — and some custodians don’t support NY state withholding at all (our custodian matrix tracks who does). A late-year conversion usually means filing the annualized-income schedule (IT-2105.9) to avoid a penalty computed as if the income arrived evenly all year.

Authority: Form IT-2105-I (2026), New York City tax rates, p.10; NY Tax Law §1304/§605(b) (resident definition via tax.ny.gov definitions page) · Form IT-2105-I (2026), New York State tax rates, p.10; NY Tax Law §601 as amended by FY2026 budget · Form IT-2105-I (2026), line 22a; NY Tax Law §1321 · Form IT-2105-I (2026), tax computation worksheets 1–16; NY Tax Law §601(d-1) · Form IT-2105-I (2026); Form IT-2105.9 / IT-2105.9-I; NY Tax Law §685(c)(4) · verified 2026-07-18

Leaving New York (or arriving): who taxes the conversion?

Federal law settles the endgame: 4 U.S.C. §114 bars any state from taxing the retirement income of a nonresident, and New York’s own guidance concedes it covers Roth IRA distributions and conversion income. Work thirty years in Manhattan, retire to Florida, convert the whole IRA — New York’s share is zero. The fight is never about the rule; it’s about whether you actually stopped being a New Yorker.

What makes New York famous here is enforcement. Departure audits apply five primary domicile factors (home, business, time, “near and dear” items, family), the taxpayer bears the burden with clear and convincing evidence, and statutory residency operates as an independent trap: keep any permanent place of abode in the state for more than 10 months of the year and spend more than 183 days here — any part of a day counts — and you’re a full resident again, domicile change or not. For a genuinely departed New Yorker, though, the arithmetic is dramatic: on a $100,000 conversion, a NYC resident pays roughly $10,200 of state-and-city tax; a Florida resident pays $0.

Authority: 4 U.S.C. §114(a), (b)(1)(E) (P.L. 104-95) · NY Tax Law §605(b)(1)(B); 20 NYCRR 105.20(a)(2); Nonresident Audit Guidelines (Dec. 2021), §VI.D (10-month rule) · Nonresident Audit Guidelines (Dec. 2021), §IV.D; Bodfish v. Gallman, 50 AD2d 457; Matter of Newcomb, 192 NY 238 · TSB-M-98(7)I (NYS Dept. of Taxation & Finance, 12/24/1998); 2025 IT-203-I · TSB-M-98(7)I; 2025 Form IT-203-I (NYS amount column); NY Tax Law §639 (accruals) · verified 2026-07-18

The Roth IRA New York may have already opened for you

Since October 2025, NY Secure Choice has required employers with 10+ New York employees and no retirement plan to auto-enroll workers — at a 3% payroll deduction, into a Roth IRA. That account type is not a menu choice; it’s the whole program. Employer registration rolled out in waves through 2026 (30+ employees by March 18; 15–29 by May 15; 10–14 by July 15), so by the time you read this, most covered workers are in.

• You can leave anytime. A 30-day opt-out window runs before contributions start, and opting out (or back in) stays available afterward.
• The federal rules still apply — and nobody checks. The program doesn’t screen income; a high earner above the Roth MAGI phase-out can be auto-enrolled into excess contributions that accrue a 6%-per-year federal excise tax until removed. The program’s policies put that burden on you.
• It’s a real Roth with real costs: $28/year (billed $7 quarterly) plus fund expenses; contributions ride the standard $7,500/$8,600 limits; no employer match is permitted.
• NYC’s own program (Retirement Security for All) exists on paper but stood down in favor of the state program.

Authority: IRC §408A(c)(3) + §4973; IRS Notice 2025-67 (2026 COLAs); NY Secure Choice Board Policies and Procedures · NY Gen. Bus. Law Art. 43 (§§1300–1316); Ch. 452, L.2021 (S5395A, mandatory auto-enrollment) · NY Gen. Bus. Law §1300; NY Secure Choice Board Policies and Procedures (updated June 17, 2026) · NY Gen. Bus. Law §§1300, 1310, 1313; NY Secure Choice Board Policies and Procedures · verified 2026-07-18

The public-employee corner

New York’s enormous public workforce gets Roth access through a thicket of plans — with one state-tax nuance worth knowing:

• NYS Deferred Compensation (457): Roth option available, though some participating local employers haven’t enabled it.
• NYC Deferred Compensation: Roth versions of both the 457 and the 401(k).
• NYCE IRA: a city-run traditional and Roth IRA for city employees (and spouses), with payroll deduction since August 2025.
• TRS NYC’s TDA: added a Roth option starting tax year 2026 — new enough that most members haven’t heard.
• The nuance: government pensions are 100% NY-exempt, but government 457(b) withdrawals are not — they only qualify for the $20,000 exclusion, and only as periodic payments. The documented workaround: roll the 457 into your own IRA first, then IRA distributions qualify under the ordinary rules.

Authority: IRC §457(b), §402A; NYSDCP brochure NRM-8275NY-NY.15 (11/24) · NY Tax Law §612(c)(3-a); TSB-M-02(9)I (10/17/2002) · NYC Office of Labor Relations DCP; SECURE 2.0 §603 / IRC §414(v)(7) · NYC Office of Labor Relations NYCE IRA program pages (2026 limits posted) · TRS NYC TDA Program (IRC §403(b)); NYSTRS employer manual (district TSAs) · verified 2026-07-18

Protection: lawsuits, bankruptcy, nursing homes, and death

Your own Roth is well protected. CPLR §5205(c) names Roth IRAs explicitly and deems them spendthrift trusts — shielded from money judgments in and out of bankruptcy, without a dollar cap. The exceptions are narrow: contributions made within 90 days of the claim, fraudulent transfers, domestic-support orders, and federal tax levies.

An inherited Roth is another matter — and New York’s courts are openly split. In bankruptcy, In re Todd (2018, affirmed 2019) held an inherited IRA is not exempt. Outside bankruptcy, the First Department ruled an inherited IRA exempt in 2021 (Cohen Goldstein v Schlachet) — then ruled the opposite in 2023 (Storch Amini v Schlachet), expressly declining to follow its own 2021 decision. No Court of Appeals ruling exists. Until it does, prudent planning treats an inherited Roth as exposed in New York.

Nursing homes and Medicaid: a Roth IRA is a countable resource for NY Medicaid unless it’s in “payout status” — receiving regularly scheduled periodic payments of any amount, at which point the account is exempt and only the payments count as income. The state’s old rule requiring payouts to be maximized was rescinded in December 2025. One honest gap: no published guidance addresses what payout status means for a Roth that has no required distributions — the generic definition is all there is.

At death: New York has no inheritance tax and no gift tax, and a qualified inherited-Roth distribution is New York-tax-free — the decedent’s unused $20,000 exclusion even passes to beneficiaries regardless of their age. The estate tax is the watch item: a $7,350,000 exclusion (2026) with the notorious 105% cliff — a New York taxable estate over $7,717,500 loses the entire exclusion, not just the excess — no spousal portability, and your Roth counts toward the estate in full.

Authority: In re Todd, 585 B.R. 297 (Bankr. N.D.N.Y. 2018), aff'd, Todd v. Endurance Am. Ins. Co., No. 1:18-cv-00420 (N.D.N.Y. Jan. 17, 2019); Clark v. Rameker, 573 U.S. 122 (2014) · NY CPLR §5205(c)(2), (c)(3) · NY Tax Law §612(c)(3-a); DTF Information for retired persons; TSB-M-02(9)I · NY Tax Law §952(c) · NYSDOH GIS 25 MA/15 (12/23/2025) · NYSDOH GIS 25 MA/15; 42 CFR §435.608 (as amended); 18 NYCRR §360-2.3(c)(1) · verified 2026-07-18

Four New York fears you can retire

State-tax folklore runs ahead of the law. These worries come up constantly — and in New York, each one is wrong:

• verified“A conversion will cost me my Enhanced STAR” — no, it won’t. STAR’s income definition is federal AGI minus taxable IRA distributions — and conversion income is an IRA distribution. Convert $100,000 and your STAR income doesn’t move. (Enhanced STAR’s 2026 limit is $110,750.)
• verified“New York will recapture my 529 deduction if I roll to a Roth” — not since 2024. Since September 5, 2024, a SECURE 2.0 529→Roth rollover is a qualified withdrawal under NY law: no deduction recapture, no state tax on earnings. (K-12 tuition withdrawals remain NY-nonqualified — that trap is real.)
• verified“New York adds its own early-withdrawal penalty” — it doesn’t. A nonqualified withdrawal owes NY income tax on the earnings portion (because it’s federally taxable), but there is no NY analogue to the federal 10% penalty.
• verified“Social Security plus my pension will eat the $20,000 window” — usually not. Social Security is fully NY-exempt, and NYS/local/federal government pensions are fully exempt with no dollar cap — neither consumes the $20,000 exclusion, which is reserved for private pensions, IRAs, and conversions.

The fine print that actually bites

Everything below comes from statutes, official instructions, and program documents surfaced during verification:

• priority_highThe $107,650 recapture makes conversions pricier than the sticker rate. Above $107,650 of NY income, a worksheet phases out the savings from the lower brackets over the next $50,000 — so a conversion pushing you through the $107,650–$157,650 band carries an effective NYS marginal rate above the printed one. From $157,650 (single) the recapture is complete and the whole calculation runs at a flat 5.9% until the next bracket.
• priority_highTurning 59½ mid-year is a timing trap. The $20,000 exclusion applies only to income received on or after the day you turn 59½ — convert in March, turn 59½ in April, and none of that conversion qualifies. Convert the day after instead and up to $20,000 is state-tax-free. Same year, same money, different result.
• priority_highA Q4 conversion can generate an underpayment penalty by default. NY assesses estimated-tax penalties per quarter. A December conversion looks like income you should have been prepaying since April — unless you file Form IT-2105.9 with the annualized-income method to show the income actually arrived in Q4. Custodians treat NY withholding as voluntary (Form IT-2104-P), and several fintech custodians don’t support state withholding at all.
• priority_highSecure Choice doesn’t check whether you’re allowed to contribute. The state’s auto-enrollment Roth applies the federal Roth MAGI limits — but nobody screens for them. A high earner at a small employer can be auto-enrolled into excess contributions accruing the 6%-per-year federal excise tax until fixed. The program’s own policies put that responsibility entirely on the saver.
• priority_highYonkers taxes your conversion as a percentage of your tax. The Yonkers resident surcharge is 16.75% of your net NYS tax — so it silently scales with everything above, recapture included.
• priority_highEPIC and the IT-214 credit are the real benefit cliffs. STAR ignores conversions (see below), but the EPIC senior prescription program has hard income caps ($75,000 single / $100,000 married) and the IT-214 property-tax credit cuts off at $18,000 — a conversion can push a senior past either.
• priority_highThe state’s own 457 brochure carries a stale RMD claim. NYSDCP’s Roth-457 brochure still says Roth 457 balances face lifetime RMDs — that rule died with SECURE 2.0 §325 in 2024. Trust the statute, not the brochure.
• priority_highThe estate-tax cliff punishes the marginal dollar absurdly. Cross 105% of the exclusion ($7,717,500 in 2026) and NY taxes the entire estate, not the excess — and unlike federal law, a deceased spouse’s unused NY exclusion doesn’t carry over. Large Roth balances count toward the estate like any other asset.

Methodology & update log

This page is built from a 72-fact dataset researched exclusively from primary sources — New York statutes, Department of Taxation and Finance memoranda and current form instructions, court opinions, Medicaid directives, and official program documents. An independent adversarial pass then re-fetched every cited source, checked each quote verbatim, hunted for superseding guidance, and re-derived the arithmetic; 70 of 72 facts confirmed, and the two corrections tightened a statutory citation and upgraded the inherited-IRA answer with newer case law. Where the state publishes nothing, the page says so rather than guessing.

• 2026-07-18 — page published; all 72 facts verified this date. Watch-list: bills to raise the $20,000 exclusion (unenacted); NY’s undetermined treatment of OBBBA’s expanded 529 K-12/credentialing expenses; Secure Choice enforcement posture after the July 15, 2026 registration wave.

Spot an error? Tell us — corrections are logged in the changelog.

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