Last week, after months of negotiations, New York legislators approved a budget bill that includes more than $3 billion in tax reductions and incentives for individuals and a payroll tax hike for large employers in New York City and nearby suburbs.
According to Argi O’Leary, Principal, Advocacy, at Ryan, “the 2025-2026 budget process was drawn out largely over policy issues. The revenue implications of the budget provisions impacting businesses were a ‘mixed bag,’ but it remains to be seen how changes at the federal level will impact New York’s revenue throughout the balance of the fiscal year. New York, like other states, is anticipating the need to raise additional revenue or cut spending later in the year, and a special legislative session is certainly possible.”
Governor Kathy Hochul signed the budget legislation on May 9, 2025.
Impact on Businesses
The payroll mobility tax on employers with more than $10 million in payroll was increased to help offset a $35.4 billion shortfall in the Metropolitan Transportation Authority’s five-year capital plan for improvements to subways and commuter rail lines. The rate imposed on large New York City employers will increase from 0.6% to nearly 0.9%. The impact will also extend to employers in suburbs included in the public transportation network, such as the Hudson Valley and Long Island, whose rates will increase from 0.3% to about 0.6%. Smaller employers will see a 50% reduction in their payroll taxes.
The budget bill fully funds the Metropolitan Transportation Authority’s $68.4 billion 2025-2029 capital plan and provides a degree of certainty in the MTA’s planning for transportation infrastructure upgrades.
Impact on Individuals
The budget bill includes the governor’s plan to provide more than $1 billion in tax relief to more than 8.3 million New Yorkers, by reducing rates for taxpayers making up to $323,200 as joint filers. The budget bill reduces rates across five of the state’s nine personal income tax brackets by 20 basis points over two years. The package also includes the governor’s expanded child tax credit of up to $1,000 for children aged three and younger and $500 for children four and older. Joint filers making $110,000 or less are eligible for the full credit, which gradually phases out as income increases.
The governor’s original plan included a rebate to taxpayers, which was scaled back slightly by legislators to a cost of about $2 billion. Single taxpayers with income under $75,000 will receive a check for $200, and those with income between $75,000 and $150,000 will receive $150. Taxpayers filing jointly with income less than $150,000 will receive checks for $400, while those making between $150,000 and $300,000 will receive $300.
The legislation also extends until 2032 the state’s current top income tax rate of 9.65% for New Yorkers earning more than $1 million per year.
Social Services
The budget bill allocates $8 billion in reserves to discharge New York’s unemployment insurance debt and increase unemployment benefits for the first time in six years. The deficit in the funding was created by borrowing from the federal government to cover pandemic-era unemployment claims, resulting in the weekly benefit for workers being capped at $504 since 2019. The maximum weekly benefit will increase to $869 this year. In a measure designed to provide additional funding to the system, slightly increased payroll taxes will be imposed on employers.
Please contact our Ryan tax professionals listed below for more information regarding this legislation and how it may impact your business.
TECHNICAL INFORMATION CONTACTS:
Tony Gulotta
Principal
Ryan
212.871.3901
tony.gulotta@ryan.com
Argi O’Leary
Principal
Ryan
212.871.3901
argi.oleary@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.