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Important notice regarding Form NYC-1127 for tax year 2025
Applicable to nonresident employees of the City of New York hired on or after January 4, 1973
The New York City Department of Finance (DOF) has identified an error in the Form NYC-1127 and related instructions. This error has an effect upon the calculation of Section 1127 amount due to New York City for tax year 2025.
The error relates to the School Tax Relief (STAR) benefit referenced on Form NYC-1127, Schedule B, lines A1 and A2. Since a change in the applicable law that took effect in 2016, the STAR benefit has been a credit against the New York State personal income tax and is not allowable in the calculation of NYC Section 1127 liability. As a result, taxpayers should not claim a STAR benefit on Form NYC-1127. DOF has adjusted, or will adjust, tax year 2025 NYC-1127 filings, where applicable, to remove the STAR benefit from the Section 1127 calculation.
The tax year 2025 Form NYC-1127 instructions and Schedule B references to STAR on lines A1 and A2 are incorrect for purposes of calculating Section 1127 liability and should not be relied upon. In the event of any inconsistency between this notice and the tax year 2025 Form NYC-1127 instructions, this notice governs.
For tax year 2025, taxpayers, tax preparers, and software developers should calculate Section 1127 liability in accordance with the guidance contained in this notice and illustrated below:
- Schedule B, Line A1, NYC School Tax Credit: Enter 0 or leave blank.
- Schedule B, Line A2, NYC School Tax Credit: Enter 0 or leave blank.
- “Enter income used to calculate eligibility for credit on Line A1”: Leave blank.
No STAR benefit may be included in the calculation of tax year 2025 Section 1127 liability.
Tax year 2025 Form NYC-1127 should be prepared and filed in accordance with these corrections.
Tax software developers and tax preparers should update their tax year 2025 Form NYC-1127 calculations as follows:
- Do not include the STAR benefit in the computation of Section 1127 liability.
- Enter 0 for lines A1 and A2 under Schedule B.
- Leave the field next to “Enter income used to calculate eligibility for credit on Line A1” blank.
This notice serves as the Department of Finance's official guidance for the preparation, review, and programming of tax year 2025 Form NYC-1127 returns.
Taxpayers who file Form NYC-1127 for tax year 2025 using the currently published form or instructions without applying the guidance in this notice may receive a notice of adjustment from DOF and may be required to pay additional Section 1127 liability, if applicable.
DOF will update its published NYC-1127 forms and instructions beginning with tax year 2026.
