By Steven J. Eller, CPA, JD
On May 9, 2025, Governor Kathy Hochul signed New York State’s Budget Bill (Budget) for the 2026 fiscal year. The key tax provisions are below:
Personal Income Tax
- The state’s first five tax brackets are cut by 20 basis points (0.2%) each over two years, thus providing a reduced tax rate for joint filers earning up to $323,000.
- The state’s temporary high income surcharge rate is extended for five years.
- The child tax credit is expanded for three years by increasing the maximum credit from $330 to $1,000 for children under age four and $500 for children aged four though 16. The restrictive earned income requirement was eliminated, thereby allowing families who earn up to $170,000 to receive the credit.
- The Budget enacts a one-time inflation refund check. Specifically, joint tax filers with income up to $150,000 will receive a $400 check and joint filers with income over $150,000 but no greater than $300,000 will receive a $300 check. Single tax filers with income up to $75,000 will receive a $200 check and single filers with incomes over $75,000 but no greater than $150,000 will receive a $150 check. Filers will not have to do anything to receive the refund. If a tax return was filed reporting income below the thresholds, the refund check will be issued automatically.
- There are a number of changes with respect to the Metropolitan Commuter Transportation Mobility Tax (MCTMT). For non-government employers located in Zone 1 (the five boroughs of New York City), effective July 1, 2025, there are changes in the payroll brackets and rates including a new tax rate of .895% on quarterly payroll greater than $2,500,000. For non-government employers located in Zone 2 (the seven surrounding counties), effective July 1, 2025, there are changes in the payroll brackets and rates including a new tax rate of .635% on quarterly payroll greater than $2,500,000. In addition, the MCTMT is eliminated for self-employed individuals earning $150,000 or less annually.
Federal Partnership Adjustment Reporting
- New York now conforms its rules for adjustments to partnership returns to the federal rules, which no longer require partnerships to file amended federal partnership tax returns to report adjustments made due to a federal partnership level audit, or changes that are self-reported under an Administrative Adjustment Request (AAR). Partnerships will now be required to report and pay New York tax on federal adjustments that result in underpayments of tax.
Corporation Tax
- The threshold requirement to pay estimated tax is increased from $1,000 to $5,000.
Estate/Gift Tax
- The three-year gift add-back rule that was previously extended to January 1, 2026 was made permanent.
Miscellaneous Provisions
The Budget extends many credits such as the clean heating fuel credit, alternative fuels and electric vehicle credit, workers with disabilities credit and the hire a veteran credit, among others.
Contact Us
If you have questions related to the Budget or need assistance with state tax issues generally, contact your client engagement partner or:
Steven J. Eller, CPA, JD
Partner
seller@pkfod.com
Nicholas Rochedieu, JD
Partner
nrochedieu@pkfod.com
Jill Cantor, CPA, JD
Director
jcantor@pkfod.com