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Volume 6 - Opinions of Counsel SBEA No. 115

Opinions of Counsel index

Aged exemption (income requirement) (social security - self employment) - Real Property Tax Law, § 467:

In computing his income for purposes of the aged exemption (Real Property Tax Law, § 467), a formerly self-employed person may not deduct from the amount of social security he receives any moneys he paid into the social security system.

Our opinion has been requested concerning the method by which income is calculated for purposes of the aged exemption (Real Property Tax Law, § 467). Specifically, the applicant states that he was self-employed and therefore paid “both ends of the social security tax (employee and employer).” He asks if some portion of the amount contributed by him may be deducted from the amount of social security he now receives in calculating income for purposes of section 467.

Income is defined in paragraph (a) of subdivision 3 of section 467 as including “social security and retirement benefits, interest, dividends, total gain from the sale or exchange of a capital asset which may be offset by a loss from the sale or exchange of a capital asset in the same income tax year, net rental income, salary or earnings, and net income from self-employment, but shall not include a return of capital, gifts or inheritances.” Thus, despite the fact that social security is not taxable for the purposes of federal income tax, the amount received from that source must be included in calculating income for purposes of the aged exemption (4 Op.Counsel SBEA No. 99). As the Court of Appeals stated in the case of Engle v. Talarico, 33 N.Y.2d 237, 306 N.E.2d 796, 351 N.Y.S.2d 677, “[The] Legislature expressed no intention of incorporating the Federal or State tax rules into the exemption statute” (351 N.Y.S.2d at 679).

Social security is not a pension fund or an annuity. Rather,

[i]t provides for the establishment of a nation-wide federal and state system of old-age assistance; disability, old age, and survivors’ insurance benefits; grants to states for unemployment compensation administration; grants to states for aid to dependent children, maternal and child welfare, and services to crippled children; grants to states for services to the aged, blind or disabled; grants for planning comprehensive action to combat mental retardation; health insurance for the aged; and grants to states for medical assistance programs (70 Am.Jur.2d, Social Security and Medicare, § 1).

Clearly, just as in the case of an employee contribution to the social security system, the contribution made by a self-employed person as employer is not in the nature of an annuity, but rather, is a tax (26 U.S.C. § 1401).

Accordingly, given the current provisions of section 467, it is our opinion that a self-employed individual may not deduct from the amount of social security benefits he receives any amount representing moneys he paid into the social security system.

May 7, 1979

Updated: