New York’s FY 2027 budget was signed on May 28, 2026, after the Legislature passed the tax implementation bill on May 27, 2026. The enacted package includes several notable tax provisions affecting individuals, businesses, and certain New York City real estate owners.

Key takeaways:

• The New York FY 2027 budget includes several tax changes affecting individuals and families, including state income tax relief for certain tipped income, an enhanced child and dependent care credit, and a on-time POWER energy rebate.
• NYC property owners should review the new pied-à-terre surcharge, which may increase annual costs for certain high-value second homes, condos, and co-ops that are not primary residences.
• Businesses should prepare for continued elevated corporate tax rates and review how New York’s decoupling from certain federal tax provisions may affect state and city tax planning.

What you should know

1. New York enacted state income tax relief for certain tip income.

New York will eliminate state income tax on up to $25,000 of qualified tipped income in tax year 2026, consistent with federal tax rules.

2. A revised New York child and dependent care credit begins in 2026.

The enacted budget provides a refundable New York child and dependent care credit for taxable years, beginning on or after January 1, 2026. The budget reflects expense caps of

• $3,000 for one qualifying individual;
• $6,000 for two qualifying individuals;
• $7,500 for three qualifying individuals;
• $8,500 for four qualifying individuals;
• $9,000 for five or more qualifying individuals.

The applicable credit percentage (percentage used to determine how much of a taxpayer’s eligible care costs are used to calculate the total credit amount) begins at 55% for lower-income taxpayers and phases down, but not below 4%. The credit is also reduced by $20 for each $1,000 the taxpayer’s New York adjusted gross income (AGI) exceeds $750,000.

3. One-time POWER energy rebate credit.

The budget creates a 2026 Protecting Our Wallets Energy Rebate (POWER) credit. Eligibility is based on the taxpayer’s 2024 NY return and income:

• Joint filers/qualified surviving spouses (QSS) qualify up to $300,000 NY Adjusted Gross Income (AGI)
• Single/married filing separately (MFS)/head-of-household (HOH) filers qualify up to $150,000.

Credit amounts are:

• $200 for married filing jointly and QSS filers with New York AGI of $150,000 or less;
• $150 for married filing jointly and QSS filers with New York AGI above $150,000 and up to $300,000;
• and $100 for single, married filing separately, head-of-household filers with New York AGI of $150,000 or less.

4. New York adopted a new NYC pied-à-terre surcharge on certain luxury homes, condos, and co-ops.

As discussed in the previous Rubin Report, this budget authorizes NYC to impose a surcharge beginning July 1, 2026, on covered properties that are not primary residences. To help taxpayers better understand the new surcharge, the Rubin Report breaks down the surcharge, who it may affect, and key considerations for impacted taxpayers in greater detail.

For the initial phase (July 1, 2026–June 30, 2028), thresholds are generally $5 million phase-one value for class-one property and $1 million phase-one value for condo/co-op units.  

Initial rates are:

• 0.8% to 1.3% for class-one property
• 4.0% to 6.5% for condo/co-op units, depending on value. The authorization expires June 30, 2031.

5. Corporate taxpayers should expect continued elevated New York corporate tax treatment.

The budget extends the current 7.25% Article 9-A business income base rate for taxpayers with a business income base over $5 million through tax years beginning before January 1, 2030.

6. New York selectively decoupled from certain federal OBBBA / H.R. 1 provisions.

New York retroactively decoupled from selected provisions of the federal One Big Beautiful Bill Act, including treatment of research and experimental costs, for both New York State and New York City taxes. Additionally, interest and penalty relief related to underpayments caused by retroactive decoupling will be provided.

7. Additional business and indirect tax changes.

The enacted bill includes provisions involving the commercial security tax credit, the New York City musical and theatrical production credit, alternative nicotine and vapor products taxation, a sales and use tax reregistration program, extensions of certain sales tax exemptions, and various technical and industry-specific tax provisions.

DDK takeaway

For many clients, the most immediate planning items will be:

• Reviewing how New York’s tax rules for 2025 and 2026 may differ from recent federal tax law changes under the One Big Beautiful Bill Act (OBBBA)
• Identifying tax benefits for tipped workers and families who qualify for the enhanced child and dependent care credit
• Reviewing the impact of the new pied-à-terre surcharge for owners of high-value New York City second homes.

If you have any questions or concerns on how this budget may impact you, reach out to your DDK team or connect with us here.

DDK will continue to monitor technical guidance and implementation details as they are released.

This alert is intended as a general summary and should not be relied on as tax advice for any specific taxpayer situation.