New York tax changes for 2026 and 2027 affect individuals, businesses, property owners, and tax-exempt organizations in different ways. The state’s 2026–2027 budget includes new credits and deductions, extends certain business tax provisions, and decouples some state and New York City tax calculations from recent federal tax changes.
Because New York State and New York City do not always follow federal tax law, a federal tax benefit may not carry over to a state or city return. Taxpayers should review how the new rules apply to their entity, income, property, and filing year before updating estimates or accounting records.
New York State tax changes for individuals
Several New York tax changes provide targeted individual relief beginning in 2026. Eligibility may depend on income, filing status, qualifying expenses, and the timing of the tax year, so taxpayers should keep supporting records and confirm the rules when preparing their returns.
Child and dependent care credit
A new refundable New York State child and dependent care credit applies for taxable years beginning on or after January 1, 2026. The credit is based on qualifying care expenses and qualifying individuals, with the amount generally tied to New York adjusted gross income. The state’s formula provides a higher percentage at lower income levels and phases down as income rises, subject to detailed statutory rules.
Families should track provider information, payments, qualifying care expenses, and other records needed to support the claim. Since this is a state credit with its own formula, taxpayers should not assume the federal credit amount or eligibility calculation will be identical.
Subtraction for qualified tips
For tax year 2026, New York allows a subtraction from state adjusted gross income for up to $25,000 of qualified tips, subject to eligibility rules and income limits. The stated income thresholds are $150,000 for single filers and $300,000 for joint filers. The subtraction is limited to qualifying tips and may be reduced or unavailable depending on a taxpayer’s circumstances.
Employees and employers should maintain payroll and tip records that distinguish qualified tips from other compensation. Taxpayers should also confirm how the state subtraction interacts with federal reporting and the final New York return instructions.
POWER rebate checks
The Property, Wealth and Education Relief (POWER) program provides one-time rebates to eligible New York residents based on information from their 2024 state income tax returns. Eligible single, head-of-household, and married-filing-separately filers with New York adjusted gross income at or below $150,000 may receive $100. Joint filers and qualifying surviving spouses with income at or below $150,000 may receive $200; those with income above $150,000 and up to $300,000 may receive $150.
Residents do not apply separately. The state said qualifying payments would be mailed in fall 2026, using the return and eligibility information specified by the program. See the New York Department of Taxation and Finance POWER rebate information for eligibility and payment details.
New York State business tax changes
Businesses need to track New York tax changes separately from federal changes, especially when claiming accelerated depreciation, research deductions, or interest deductions. A business may need one set of calculations for federal tax and another for New York State or New York City purposes.
Research and experimental costs
For tax years beginning on or after January 1, 2025, New York State decouples from the federal deduction for research and experimental expenditures under Internal Revenue Code Section 174A. New York taxpayers generally must add back the federal deduction and amortize the applicable costs over 60 months for state purposes.
For costs paid or incurred before January 1, 2025, the prior federal rules, as in effect on January 1, 2022, continue to guide the New York treatment. That can mean continuing the applicable five-year domestic or 15-year foreign amortization schedule for those earlier costs rather than treating all remaining amounts as an immediate state deduction. Businesses should track the vintage, location, and tax treatment of costs by year.
Qualified production property depreciation
For federal purposes, recent legislation introduced a special deduction for certain qualified production property under Section 168(n). New York State requires taxpayers to add back the federal accelerated deduction and calculate regular depreciation as though that special federal election had not been made.
Manufacturers considering a facility project should model the federal and New York timing differences before claiming the deduction. New York’s adjustment affects the state calculation and may require separate depreciation schedules.
Corporate franchise tax rate extension
The 2026–2027 budget extended the temporary 7.25% New York State corporate income base tax rate for qualifying taxpayers through 2029. The rate generally applies to C corporations with income base above the statutory threshold. Corporate taxpayers should confirm which tax base controls their liability and whether they fall within the rate provision.
New York City business tax changes
New York City adopted its own set of adjustments for certain federal tax provisions. These New York tax changes may affect corporations, partnerships, and other businesses subject to city business taxes, even when the related federal deduction is allowed.
For tax years beginning after December 31, 2024, the city requires modifications related to the new qualified production property deduction, increased federal Section 179 expensing limits, domestic research expensing, and certain interest deduction calculations under Section 163(j). The city generally requires businesses to calculate these items using its specified state and local treatment rather than simply carrying the federal result onto the city return.
Separate depreciation and expensing calculations
For qualified production property, New York City taxpayers generally add back the special federal deduction and claim regular depreciation. For Section 179, the city requires use of the pre-OBBBA limits, as adjusted under applicable city guidance, rather than the increased federal limits.
For domestic research and experimental expenditures, the city generally requires five-year amortization using the midpoint convention for tax years beginning after December 31, 2024. Foreign research costs remain subject to a 15-year period. The city has indicated that it does not require a modification for the federal transition or catch-up deduction relating to 2022–2024 domestic costs. The details differ from the New York State approach, so separate workpapers are important.
Section 163(j) interest limitation
New York City also requires an adjustment for the increase in a federal interest deduction that results from including depreciation, amortization, and depletion in adjusted taxable income under the revised Section 163(j) calculation. This can require a technical recomputation rather than a simple add-back of the full interest expense.
City guidance provides limited penalty and interest relief for certain affected 2025 returns that were timely extended or amended solely to report the Part G changes. The relief is subject to conditions; businesses should review the city’s business tax change guidance before relying on it.
New York City surcharge on certain high-value residences
New York City has enacted a surcharge on certain high-value residential properties that are not used as the owner’s primary residence. For tax years 2026–2027 and 2027–2028, the surcharge can apply to qualifying one-, two-, or three-family homes with a city-assessed value above $5 million, as well as qualifying condominium and cooperative units with assessed values of at least $1 million.
The rates depend on property type and value. For qualifying homes, the rates range from 0.8% for assessed values from $5 million to under $15 million, to 1.3% for values of $25 million or more. For qualifying condominiums and co-ops, the rates range from 4% for values from $1 million to under $3 million, to 6.5% for values of $5 million or more.
Exemptions may apply when the property is the primary residence of the owner, a tenant, or certain immediate family members, subject to the city’s requirements. The exemption application deadline for the 2026–2027 tax year was October 13, 2026; the first charges are scheduled to appear on property tax bills due January 1, 2027. Owners should review the NYC Department of Finance pied-à-terre surcharge information for current eligibility, valuation, and billing details.
How businesses and individuals can prepare
The variety of New York tax changes makes it important to keep state and city calculations distinct from federal filings. Businesses with research costs, production facilities, significant equipment purchases, or NYC business tax filings may need to update fixed-asset systems and tax provision workpapers. Individuals may need better records for tips, care expenses, and rebate eligibility.
- Identify affected years and entities. Confirm which tax year begins after the effective date and which entities or individuals are covered.
- Maintain separate schedules. Track federal, New York State, and New York City depreciation and research-cost treatments separately.
- Revisit estimates and projections. Changes in deductions, credits, and tax rates may affect estimated tax payments, cash planning, and financial statement provisions.
- Keep source documentation. Retain invoices, payroll records, research project detail, property valuations, care expenses, and grant or rebate correspondence.
- Check return relief carefully. Penalty or interest relief is conditional and generally should not be assumed without confirming the relevant notice or city guidance.
Businesses planning investments or reorganizations should evaluate tax effects before committing to a transaction. Bowers provides tax services and supports businesses with accounting and advisory services. New York-based pass-through entities may also want to review Bowers’ overview of the New York State Pass-Through Entity Tax.
Review the rules before filing
New York tax changes for 2026–2027 create new planning opportunities and additional recordkeeping for many taxpayers. The most important practical step is identifying which provisions apply and building the required calculations into the organization’s tax and accounting process early.
Since effective dates, eligibility tests, and conformity rules vary, taxpayers should review current state and city guidance before filing or changing estimates. An advisor can help translate the rules into separate federal, New York State, and New York City calculations that fit the taxpayer’s specific facts.
Questions about New York tax changes
New York State and New York City rules may differ from federal tax law and from each other. These answers highlight several changes taking effect or relevant during 2026 and 2027.
When do the new child and dependent care credit rules begin?
The new refundable New York State credit applies to taxable years beginning on or after January 1, 2026. The amount depends on qualifying care expenses, qualifying individuals, income, and other statutory requirements.
Does New York follow the federal research expense deduction?
Not for New York State tax years beginning on or after January 1, 2025. The state generally requires an add-back of the federal deduction and its own 60-month amortization for applicable costs, with different treatment for earlier costs. NYC has separate rules.
Who may receive a POWER rebate?
Eligible full-year New York residents may receive a one-time payment based on their 2024 return, filing status, income, and other program rules. No separate application is required under the state program.
Does the NYC residential surcharge apply to every second home?
No. It applies to specified high-value residential properties that meet the city’s valuation and non-primary-residence rules. Exemptions may be available for a qualifying primary residence of an owner, tenant, or certain family members.
What should NYC businesses do about the federal tax changes?
Review the city’s Part G guidance and maintain separate calculations for affected deductions, including depreciation, Section 179, research costs, and Section 163(j). State and city treatment may not match federal treatment or each other.