On May 9, 2025, New York Governor Kathy Hochul signed A3009, implementing the state’s budget bill (the “law”) for the 2025-2026 state fiscal year. The law contains many tax provisions summarized below.
Estimated Personal Income Taxes
The threshold for filing estimated taxes is increased from $1,000 to $5,000, for tax years beginning on or after January 1, 2026.
Changes to the Metropolitan Commuter Transportation District Payroll Tax (“MCTD”)
The law increases the MCTD payroll tax rate for employers in Zone One and Zone Two counties effective July 1, 2025. Note that the MCTD rates paid by self-employed individuals remain unchanged (however, effective January 1, 2026, the threshold for paying MCTD tax increases to over $150,000 in earnings for the tax year, previously $50,000).
Personal Income Tax Rate Changes
For tax year 2026, the law provides for a reduction in most personal income taxes and also adds higher income tax brackets. For married filing joint taxpayers, there are nine brackets ranging from 3.9% for taxable income up $17,150 to 10.9% for taxable income over $25,000,000.
Partnership Adjustments
Partnerships must report federal tax adjustments (regardless of the tax impact) to New York State within 90 days, after:
- a final federal determination date, or
- the filing of an administrative adjustment request.
Any additional New York tax due after any adjustments is paid by the affected partnership.
Adjustments occurring before May 9, 2025, must be reported within one year of that date (no interest will be imposed).
CREDITS
Empire State Child Tax Credit
For taxable years beginning on or after January 1, 2025, and before January 1, 2026, the Empire State Child Tax Credit increases to $1,000 for each child up to three years old and $330 for each child between four years old and not yet 17 years old.
For tax years beginning on or after January 1, 2026, and before January 1, 2028, the credit is $1,000 for each child up to three years old and $500 for each child between four years old and not yet 17 years old.
Inflation Refund Credit
For the 2025 tax year, a tax credit of between $150 and $400 is available for taxpayers subject to certain income requirements and based on filing status.
Low-Income Housing Credit
Buildings financed by certain refunded bonds are eligible for the low-income housing tax credit pursuant to IRC § 42(b)(2).
Geothermal Energy Credit
The credit cap is increased to $10,000 (previously $5,000) for qualified geothermal energy systems placed in service on or after July 1, 2025.
Organ Donation Credit
For tax years beginning on or after January 1, 2025, a tax credit is available (replacing the current deduction) for full-year resident taxpayers who donate one or more human organs to another human for certain unreimbursed expenses, up to $10,000.
Manufacturing Training Tax Credit
The law adds a manufacturing training tax credit for eligible businesses operating in New York State. The credit amount is 75% of wages, salaries or other compensation, training costs, and wrap around services, up to $25,000 per employee receiving eligible training. The credit is capped at $1 million per eligible non-semiconductor manufacturing business and up to $5 million per eligible semiconductor manufacturing business.
Empire State Jobs Retention Program
The law amends the Empire State Jobs Retention Program, adding a broad definition of a business entity and revises participation in the program to a business entity (on or after June 1, 2025) that demonstrates physical damage and economic harm at location(s) where the governor has made an emergency declaration.
Credit Extensions
The following tax credits are extended to December 31, 2028:
- Clean heating fuel tax credit
- Alternative fuels and electric vehicle recharging property credit
- Workers with disabilities tax credit
- Hire a vet tax credit
- Farm workforce retention credit
The New York City musical and theatrical production credit is extended for two years to January 1, 2028. The application deadline is extended to June 30, 2027.
Excelsior Jobs Program
The credits under the Excelsior Jobs Program are extended through 2034.
MISCELLANEOUS PROVISIONS
Sales Tax-Vending Machines
The law extends the sales tax exemption for vending machine transactions to May 31, 2026.
Sales Tax Liability Relief
Subject to certain restrictions, the limited partners of a limited partnership or limited liability company (LLC) members may apply for relief from sales tax liability provisions if the limited partner or member’s ownership interest and share of profit and losses are each less than 50% and are not under a duty to act (and do not act) on behalf of the partnership or LLC.
Estate Tax
The estate tax 3-year gift addback rule is extended from January 1, 2026, until January 1, 2032.
For questions, please contact SAX’s State and Local Tax Leader Richard Goldstein at rgoldstein@saxllp.com.