Updated July 29, 2026. Quick answer: New York does not use a workday ratio for deferred compensation. 20 NYCRR §132.20 uses a four-year compensation ratio — New York compensation over the year of retirement plus the three preceding years, divided by total compensation for that period. And the regulation pulls the convenience-of-the-employer rule into that computation, which almost nobody mentions.
The allocation formula
§132.20 takes the amount in your federal adjusted gross income and applies the proportion that New York compensation “during a period consisting of the portion of the taxable year prior to retirement and the three taxable years immediately preceding the retirement” bears to total compensation over that period.
And it treats deferred comp as compensation in the first place: §132.4(d)(1) provides that where a retirement benefit does not constitute an annuity, “it is compensation for personal services and, if the individual receiving it is a nonresident, it is taxable … to the extent that the services were performed in New York State.”
Here is the part that is genuinely not written anywhere else. §132.20 directs that the New York compensation for each year in the four-year window be determined “in accordance with the applicable provisions of section 132.17, 132.18 or 132.19.” Section 132.18 is the convenience-of-the-employer rule. So the convenience rule does not apply to the deferred-comp payment directly — it applies to the annual wage figures inside the lookback, and those flow into the numerator. A New Yorker who worked from home out of state during those four years has those days counted as New York days, which raises the New York share of a payment made years later.
Two ordering points. These regulations predate 4 U.S.C. §114 and are not written around it, so the federal limit is tested first and the regulations apply to whatever falls outside it — which is how New York’s own advisory opinions approach it. And a payment that does constitute an annuity under §132.4(d)(2) is not taxable to a nonresident at all.
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Sources
4 U.S.C. §114; 20 NYCRR §132.4(c) and (d), §132.18(a) and §132.20; New York Tax Law §632(b)(1)(B); NY Advisory Opinion TSB-A-24(11)I. All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.