On May 28, 2026, Gov. Kathy Hochul signed New York’s Fiscal Year 2027 state budget act (the Act) into law. The Act includes a mix of individual, business, and New York City tax changes, with several provisions affecting New York’s conformity to recent federal tax legislation. The summary below highlights the most significant state and city income tax developments.
Individual Income Tax Provisions
Enhanced Child & Dependent Care Credit
The existing New York state child and dependent credit has been expanded and made refundable for years beginning in and after 2026.
Protecting Our Wallets Energy Rebate (POWER) Credit
Individuals who were New York residents for 2024 and timely filed a New York tax return may be eligible for a refundable credit. Eligibility applies to taxpayers with adjusted gross income below $300,000 for joint filers or $150,0000 for single, separate, or head of household filers.
The credit ranges from $100 to $300, depending on New York adjusted gross income, and will be advanced to qualifying residents in 2026.
No Tax on Tips
For tax years beginning in and after 2026, New York will follow the federal “No Tax on Tips” provisions enacted in 2025 as part of the One Big Beautiful Bill Act (OBBBA). This provision allows taxpayers receiving certain tip income to exclude up to $25,000 from gross income.
Distributions from Foreign Corporations Federally Taxable Under IRC § 962(d)
For tax years beginning after 2025, distributions from foreign corporations included in federal gross income under IRC § 962(d) will be excluded from New York adjusted gross income.
This change prevents double taxation for individuals who have made a § 962 election, under which income is taxed once at the corporate level and again upon distribution.
New York State Tax Law Changes
Extension of Current Corporate Income and Capital Base Tax Rates
The existing Article 9-A corporate income and capital base tax rates imposed on corporations, which were scheduled to decrease after 2027, have been extended through 2030.
Decoupling from OBBBA Business Provisions (all retroactive to 2025)
For tax years beginning on or after Jan. 1, 2025, the Act decouples the state’s corporate and individual income taxes from the following business tax provisions of the OBBBA:
Section 168(n) Qualified Production Property 100% Depreciation
The federally allowed 100% depreciation deduction for qualified production property constructed and placed in service after 2024 and before 2031 is not allowed for New York corporate income tax purposes. Instead, such property is depreciated for New York purposes using regular MACRS methods.
Research and Experimental Expenditures Deductions
The OBBBA repealed former section 174A’s requirement to capitalize domestic R&E expenditures and amortize them over a 60-month period. New York will not follow this federal law change and domestic R&E must continue to be capitalized and amortized for state income tax purposes.
New York City Tax Law Changes
New Tax on Second Homes (pied-a-terre)
Beginning July 1, 2026, owners of second residences in New York City with assessed values in excess of $1 million (condominiums and co-operatives) or $5 million will be subject to a surcharge on values at rates of .8% to 6.5% in excess of the above thresholds. Where second residences are owned by trusts, LLCs, or corporations, a “look-through” provision applies. See A New Tax on Second Homes: Understanding New York City’s Pied-à-Terre Surcharge for more information.
Decoupling from OBBBA Business Provisions
New York City generally conforms to the same decoupling provisions described above for New York State with the following additional modifications:
Section 163(j) Adjusted Taxable Income Base
The OBBBA revised section 163(j)’s adjusted taxable income base to include addbacks for depreciation and amortization expense, resulting in larger allowable interest deductions. New York City does not follow this addback change.
Increased Section 179 Expensing
The OBBBA increased the annual section 179 limitation from $1.25 million to $2.5 million for years after 2024. New York City will retain the pre-OBBBA limit of $1.25 million, adjusted for inflation.
Notable Proposals Excluded from the Final Legislation
The final budget also omitted several tax proposals that had been discussed earlier in the legislative process, including the following:
- Proposed increases in income tax rates on individuals or businesses
- Increases in sales tax rates or expansions of the sales tax base
- Proposed changes to the state and city’s pass-through entity tax regimes.
If you have any questions about how these changes affect you or your business, contact a CBIZ SALT Team professional.
Frequently Asked Questions
The enacted budget includes a mix of individual, business, and New York City tax law changes, along with updates to how the state conforms to recent federal tax legislation.
Many provisions apply to tax years beginning in 2026 or later, while some business-related decoupling provisions are retroactive to tax years beginning Jan. 1, 2025.
Key changes include an expanded and refundable child and dependent care credit, a new POWER rebate credit for eligible taxpayers, and the adoption of the federal “No Tax on Tips” provision allowing exclusion of certain tip income.
The budget extends current corporate income and capital base tax rates through 2030 and decouples New York from several federal business tax provisions, including bonus depreciation and research and experimental expenditure rules.
New York will not adopt certain federal changes under the One Big Beautiful Bill Act, requiring businesses to follow different rules at the state level for items like depreciation and R&E expenditures.
Yes, New York City introduces a surcharge on high-value second homes beginning July 1, 2026, with rates based on property value thresholds.
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