Key Takeaways
- New York City’s Unincorporated Business Tax (UBT) Credit decreases for residents with NYC taxable income of $1 million or more beginning in 2026.
- The UBT Credit phases down from 23% for NYC taxable income of $1 million to $1.25 million, reaching 15% at $1.25 million or more.
- Taxpayers affected by the reduced UBT Credit should review third- and fourth-quarter estimated tax payments and monitor potential underpayment penalties.
The New York City Council approved a bill on July 16 that automatically became law on August 18 after Mayor Mamdani failed to sign it. The new law reduces the Unincorporated Business Tax Credit that NYC residents may claim against their NYC personal income tax liability when their NYC taxable income is at least $1 million.
For tax years prior to 2026, if the NYC taxable income was at least $142,000, the credit equaled 23% of the income.
For tax years beginning on or after January 1, 2026, if the NYC taxable income is at least $1 million but less than $1.25 million, the 23% credit is reduced by a calculated percentage. That percentage is determined by subtracting $1 million from NYC taxable income, dividing the result by $250,000 and multiplying by 8%. If the NYC taxable income is at $1.25 million or more, the credit is reduced to a flat 15% of the income.
PKF O’Connor Davies Observation
Taxpayers that claim the credit may have paid first- and second-quarter New York State and New York City estimates which may reflect the credit as calculated under the prior law. As a result of this law change, taxpayers should consider increasing their third- and fourth-quarter estimate to make up for the reduction in the credit.
Currently, there is no indication of how this change will impact the estimated tax underpayment penalty.
Contact Us
If you have questions related to this change or need assistance with state tax issues generally, please contact your PKF O’Connor Davies client service team or:
Steven J. Eller, CPA, JD
Partner
seller@pkfod.com | 551.249.1836
Nicholas Rochedieu, JD
Partner
nrochedieu@pkfod.com | 203.705.4135
Denisse Moderski, CPA
Partner
dmoderski@pkfod.com | 646.699.2858