What Individuals and Commercial Businesses Need to Know About New York’s 2026-2027 Budget

August 25, 2026

New York enacted its $268 billion fiscal year 2027 budget on May 28, 2026, bringing sweeping changes to corporate tax, depreciation treatment, pass-through entity elections, real estate, and individual income tax. Here’s what individuals and business owners need to know.

Corporate Tax Rates Extended Through 2030

The FY 2027 budget does not increase income or business tax rates in New York. For large corporations doing business in New York, the most immediate takeaway is rate certainty: the budget locks in the current elevated rates through the end of 2029.

Corporate tax planning through 2029 should assume these rates remain in place. Budget projections and multi-year tax models should reflect the extension of both the franchise and capital base rates.

Decoupling from Federal Tax Law: Depreciation & R&E

This is the most operationally complex provision in the budget for business taxpayers. New York has decoupled from two major federal deduction enhancements enacted in the One Big Beautiful Bill (OBBB) Act, effective retroactively to January 1, 2025.

Depreciation of Qualified Production Property

Federal rule: The OBBB Act allows 100% immediate expensing for qualified production property (under IRC §167) placed in service in tax years beginning on or after January 1, 2025.

New York’s rule: New York does not conform. Businesses must continue applying New York’s existing depreciation framework for these assets, adding back any federal accelerated deduction.

Research & Experimental (R&E) Expenditures

Federal rule: The OBBB Act allows an immediate 100% deduction for domestic R&E expenditures paid or incurred in tax years beginning on or after January 1, 2025.

New York State’s rule: New York decouples from both domestic R&E (IRC §174A) and foreign R&E (IRC §174). Taxpayers must add back any deduction claimed under those provisions and instead amortize:

• Post-2024 domestic R&E expenditures over 60 months
• Pre-2025 R&E expenditures using the §174 rules in effect as of 2022

New York City’s rule: NYC decouples only from domestic R&E (§174A). Foreign R&E under §174 is not subject to the NYC addback. The NYC amortization period for domestic R&E is 5 years (computed from the midpoint of the taxable year) — different from the 60-month NYS treatment.

NYC-Only: Additional Decoupling Provisions

New York City goes further than the state with two additional decoupling measures:

• IRC §163(j) ATI: NYC does not conform to the OBBBA’s change allowing adjusted taxable income (ATI) to be computed without regard to depreciation, amortization, and depletion. Those items must remain reflected in the ATI computation for NYC purposes.
• 179 Expensing Thresholds: NYC will not conform to the OBBBA’s increased expensing thresholds for equipment and software. Prior-law thresholds apply for NYC purposes.

What This Means for Your Business

Businesses that have already filed or extended their 2025 New York returns may need to file amended returns or take these adjustments into account on returns currently in progress. Companies with significant capital investments or R&E spending face the most exposure. Importantly, no interest or penalty will accrue on underpayments arising solely from these retroactive decoupling adjustments on timely filed 2025 returns.

Pass-Through Entity Tax (PTET): Extended Election Deadline

The budget provides meaningful relief for partnerships and S corporations evaluating the PTET election by pushing the annual deadline from March 15 to September 15 of the applicable tax year. This change applies beginning with the 2027 tax year.

Previously, the early-year deadline required many entities to elect before they had adequate visibility into expected taxable income, resident owner mix, or multistate tax consequences. The extended deadline allows for a more informed decision.

Key considerations going forward:

• Estimated PTET installment timing has been revised to align with the later election date
• Electing entities must coordinate election timing with revised payment schedules to avoid underpayment exposure
• Multistate businesses should model the interaction between the PTET election and other state obligations under the new timetable

Sales Tax: Reregistration Program & Penalty Discount

Vendor Reregistration Program

The Department of Taxation and Finance is authorized to implement a statewide sales tax vendor reregistration program, to be completed by December 31, 2030. Registered vendors will be required to revalidate their registration status and provide updated information.

Businesses should anticipate:

• Certified-mail expiration notices at least 180 days before registration expiration
• A new registration application required at least 90 days before expiration
• Review of entity structures, business locations, and nexus-related facts to ensure registration records are current and consistent

Sales and Use Tax Penalty and Interest Discount Program

The budget creates a one-time discount program for eligible vendors with fixed and final sales tax liabilities. Under the program, the amount due is the full tax liability plus 50% of accrued interest through December 31, 2026.

To qualify, a taxpayer must:

• Hold a current certificate of authority subject to the reregistration program
• Have a liability that is fixed and final on or before September 1, 2026 (i.e., no remaining right to administrative or judicial review)
• Not have been convicted of a tax-related crime or be subject to a court order to pay a tax liability

Businesses with open or unresolved sales tax liabilities should evaluate whether the discount program offers an opportunity for resolution. The 50% interest reduction can be meaningful on older, high-balance assessments. Contact your tax advisor promptly, as the eligibility cutoff is September 1, 2026.

Provisions Affecting Individuals

Several budget provisions have practical implications for employers communicating tax changes to their employees.

POWER Credit — Automatic Energy Rebate

The Protecting Our Wallets Energy Rebate (POWER) credit is a  new, one-time refundable personal income tax credit available for the 2026 tax year. Eligible taxpayers will receive an automatic advance payment based on their 2024 New York return. No action is required to receive the payment if the taxpayer is eligible.

Eligibility also requires that the taxpayer was a full-year New York resident for 2024, timely filed a 2024 New York resident return (including extensions), and was not claimed as a dependent on another return. To the extent the payment is includible in federal gross income, it is not subject to New York State or local income tax.

Tip Income Subtraction

The budget adds a New York adjusted gross income subtraction for up to $25,000 in qualifying tip income, to the extent allowed as a federal deduction under IRC §224. This conforms New York’s treatment to the federal deduction for tip income enacted in the OBBBA.

NYC Pied-à-Terre Tax: New Surcharge on Non-Primary Residences

Effective July 1, 2026, New York City will impose an annual surcharge on high-value residential properties that are not used as a primary residence. While this provision primarily affects individual property owners, it has direct relevance to businesses holding NYC residential real estate through entities or trusts, as well as employers with high-net-worth employees who own NYC property.

Who Is Affected?

• Owners of NYC residential property used as a second home or investment property
• Trusts holding covered residential property
• Majority owners of entities (LLCs, partnerships, corporations) that hold covered property
• Landlords leasing residential properties — a qualifying long-term tenant may establish primary residence status and avoid the surcharge, but leases must be arms-length and well-documented

Phase One Thresholds & Rates (July 1, 2026 – June 30, 2028)

Phase two begins July 1, 2028, when all covered property will be assessed based on comparable-sales-based market values at a uniform $5 million threshold, and all property will use the Class 1 rate structure (lower rates, but higher value base). The surcharge sunsets June 30, 2031.

The NYC Department of Finance must issue initial surcharge determinations by August 30, 2026. Owners who believe their property qualifies as a primary residence must file an appeal within 30 days of the notice date. Documentation of primary residence status should be assembled now. Note: standard market value correction procedures are not available until the fiscal year beginning July 1, 2027.

Tax Credit Highlights

The budget extends, enhances, or creates several tax credits that may benefit commercial businesses:

Key Deadlines

Here’s what to individual tax-payers and commercial business owners can do before the end of the year to prepare for upcoming deadlines.

Businesses should assess the impact of R&E and depreciation decoupling on 2025 New York State and New York City returns in order to determine if filing an amended return is worthwhile.

Residential property owners in NYC should assemble their primary residence documentation before the August 30, 2026 Department of Finance deadline. The deadline to appeal the NYC pied-à-terre surcharge is 30 days after notice by the Department of Finance (on or around September 30, 2026).

Before September 1, 2026, businesses should evaluate whether or not they are eligible for the sales tax discount program and consult with their advisors.

The deadline for the PTET election has been extended to September 15, 2026; businesses should review their election strategy for the 2027 tax year and revise their installment timing if necessary.

For assistance with these deadlines, reach out to your tax professionals; we will ensure your tax planning strategy identifies the opportunities available to your business under these legislative changes.