What's happening
This bill creates a state income tax deduction for up to $20,000 in 401(k) withdrawals by terminally ill taxpayers.
Why it matters
Eases financial burden on terminally ill individuals. By allowing a state income tax deduction for up to $20,000 in 401(k) withdrawals specifically for those diagnosed with a condition expected to result in death within 12 months, the bill aims to help terminally ill taxpayers access retirement savings without facing full state tax liability, freeing up more money for urgent needs.
Targets a narrow group with clear criteria. The deduction is only available to individuals with a medically certified terminal illness, ensuring that the benefit is reserved for those facing extraordinary circumstances, rather than being a general early-withdrawal tax break.
May influence end-of-life financial planning. This targeted deduction could affect how terminally ill taxpayers and their families plan for covering medical, hospice, or personal expenses, potentially reducing stress and providing more flexibility in an already challenging time.
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Who cares
Taxpayers with terminal illnesses
Those with a medically determinable physical or mental impairment expected to cause death within 12 months could deduct up to $20,000 in 401(k) hardship distributions otherwise included in federal adjusted gross income from their New York taxable income.
Tax preparers and accountants
They would need to apply the $20,000 cap and terminal-illness eligibility requirement when preparing affected taxpayers’ state returns.
New York State Department of Taxation and Finance
The agency would administer the deduction beginning with the tax year in which the bill takes effect and continuing in subsequent years.
Headline styles
Tax Break for Terminally Ill
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to investigations and government operations
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
865
2019-2020 Regular Sessions
IN SENATE
January 9, 2019
Introduced by Sen. YOUNG -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations
AN ACT to amend the tax law, in relation to establishing a personal income tax deduction for certain withdrawals from a 401(k) plan by a taxpayer suffering from a terminal illness
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subsection (c) of section 612 of the tax law is amended by adding a new paragraph 44 to read as follows:
(44) Hardship distributions from a retirement account established pursuant to section 401(k) of the internal revenue code to the extent includable in federal adjusted gross income, provided, however, that the exclusion provided for in this paragraph shall not exceed twenty thousand dollars; provided, further, that such exclusion shall only be available by reason of a medically determinable physical or mental impairment of an individual taxpayer which can be expected to result in death within a period of not more than twelve months.
§ 2. This act shall take effect immediately and shall apply to the tax year in which it takes effect and all subsequent tax years.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD03008-01-9
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the tax law, in relation to establishing a personal income tax deduction for certain withdrawals from a 401(k) plan by a taxpayer suffering from a terminal illness
Purpose or general idea of bill
This bill grants a personal income tax deduction to taxpayers with a terminal illness who withdraw up to $20,000 from their 401(k) account on a hardship basis.
Summary of specific provisions
Section 1 adds a new paragraph 44 to subsection c of section 612 of the tax law to provide that hardship distributions from a retirement account established pursuant to section 401 (K) of the internal revenue code shall be exempt from New York state tax, to the extent includable in federal adjusted gross income, up to a maximum of $20,000. The exemption shall only be available to those who have a medically terminable condi- tion which can be expected to result in death within a period of not more than 12 months.
Justification
Federal law governs the granting of 401(k) hardship withdrawals. This bill will assist those who are facing a life ending crisis who have proven their hardship case for a withdraw of 401 (k) funds on a hardship basis in accordance with federal regulations applicable to such plans. It is unfair to subject terminally ill individuals to state income taxes when they have proven it necessary to have access to these funds. These funds are often needed to pay medical bills and other expenses which accrue when a person faces the challenges associated with a terminal illness. The situation can be magnified when the individual is no longer able to continue in an employment situation. It is only equitable that New York forgoes taxation on monies that an individual has earned which become necessary for he or she to confront medical and personal chal- lenges.
Prior legislative history
2017, 2018: S.460 Referred to Investigations and Gov't Operations
2015, 2016: S.1986A Referred to Investigations and Gov't Operations
2014: S.7333 Referred to Investigations and Gov't Operations
Fiscal implications
Undetermined.
Effective date
This act shall take effect immediately and shall apply to all subsequent taxable years.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.