I have paid New York estimated unincorporated business taxes (NYC-202 form) based on my federal income. Can I deduct the amount paid, on my federal tax form 1040 - Schedule C as a business expense?

ANSWER

The BIDaWIZ Team's Answer:

Yes, New York state income taxes that are specific to the business would be deducted on line 23 of Schedule C on your federal form 1040. This includes the estimated tax payments for the unincorporated business tax via form NYC 202S as well as items such as the Estimated Metropolitan Commuter transportation mobility tax from form MTA - 5. On the form NYC - 202S, you have to add-back these taxes via line 3. New York is saying that you can deduct taxes paid to us on your federal return, but you cannot deduct taxes paid to us on our return, thus the add-back on 202 Schedule b. Look at the Schedule B on form NYC 202S, see you start with net profit from business (which includes a deduction for line 23), BUT per line 3, you have to add-back in the deduction for taxes paid to NY (Schedule C, line 23). Generally states do not allow a deduction for taxes paid to them.