NEW YORK CITY, NY – An annual fee imposed upon employees of the City of New York who reside outside of the five boroughs, including law enforcement officers, which functions much like a tax is no longer able to be offset in part via a claimed tax credit, as the city asserts the fee is a “condition of employment” and not a tax that can be adjusted with claimed credits.
When is a de facto tax officially a tax? That’s the question on the minds of many New Yorkers employed by the City of New York who’ve opted to reside in the suburbs rather than living within the five boroughs.
According to the Tax Foundation, a tax is defined as, “a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.”
Anyone who was employed by the City of New York on or after January 4th, 1973, but doesn’t live in the city must “pay the City an amount equal to the personal income tax you would owe if you lived in New York City.”
Logic would conclude the aforementioned is a tax, but New York City claims otherwise, officially calling the levy “Non-resident NYC Employee Payments.”
Indeed, the government is demanding the money, the payments are submitted and collected along with taxpayers’ state and federal filings annually, a specialized tax form dubbed Form 1127 is used to calculate what a taxpayer owes New York City on any given year based upon their annual earnings, but it’s definitely not a tax (according to New York City).
What makes this delineation relevant is that in years past, those employed by the City of New York were able to utilize a school tax relief credit (STAR) which offset the annual levy by roughly $400 per person, according to a tax specialist who reached out to Law Enforcement Today regarding the matter.
But in April of 2026, the City of New York reportedly sent notices to city employees residing outside the five boroughs informing them that the aforementioned credit cannot be utilized because dues collected via Form 1127 are not a tax.
“We are writing to provide important information regarding your Section 1127 filing for tax year 2025. Section 1127 requires City employees who reside outside the five boroughs to make payments equivalent to the New York City personal income tax as a condition of employment. We identified an error related to the School Tax Relief (STAR) benefit claimed on lines Al and A2 (Schedule B) of the Section 1127 return. STAR has been a credit against the New York State personal income tax since 2016, and it is not allowable on the Section 1127 return,” the notice reads in part.
According to the tax specialist who reached out to Law Enforcement Today, this so-called non-tax is hitting New York’s Finest not only in their monies owed to the state/local government, but it’s also drastically altering their federal returns since the City of New York claims the annual fee isn’t a tax.
“For decades the city hasn’t called the 1127 tax a tax; they call it a ‘condition of employment.’ With the higher [State and Local Tax] cap under the One Big Beautiful Bill, the 1127 tax is not deductible simply because NYC doesn’t want to admit the 1127 nonresident tax is a tax! The typical 1127 tax is around $8,000. Most cops are in the 22% or 24% marginal tax bracket. Losing the ~$8,000 deduction for the ’nontax’ tax costs them $1,760 to $1,920 in additional tax on their federal returns,” the source claimed.
I’m no tax expert myself, but I do know a thing or two about playing with semantics.
The City of New York seems to be playing a game of splitting hairs definitionally with their resident tax versus their annual non-resident “condition of employment” fee that just so happens to be calculated on what a resident’s assessed tax would be.
The situation is akin to getting slapped in the face and the offender claiming they didn’t slap you, they just high-fived your head - it doesn’t matter how the offending party describes the action if the result on the impacted party is the same.
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