New York 2026 Tax Changes — What Residents & Business Owners Must Know
On January 1, 2026, sweeping federal tax changes begin as key provisions of the Tax Cuts and Jobs Act expire and updated rules under the One Big Beautiful Bill Act (OBBBA) take effect.
New York residents — already living in one of the highest-taxed states in the nation — will feel these federal changes more than most Americans due to the cumulative impact of federal, state, and sometimes city taxes.
These changes affect:
- W-2 earners across NYC, Buffalo, Rochester, Yonkers, Syracuse, Albany
- Dual-income households in high-cost metro areas
- Freelancers, contractors, and independent professionals
- LLCs, S-Corps, and small business owners
- Real estate investors and landlords
- STR hosts in NYC, upstate, and vacation regions
- High-income earners in finance, tech, healthcare, and law
- Retirees drawing taxable income
Below is a complete New York–specific overview of the 2026 changes.
Key Federal Changes Affecting New York in 2026
Standard Deduction Shrinks Under OBBBA + TCJA Expiration
This is especially impactful in New York, where:
- housing costs are high
- property taxes are high
- childcare expenses are high
- rent and living expenses are among the highest in the country
The reduced deduction directly increases federal taxable income and typically leads to higher New York State and NYC taxes as well.
Federal Income Tax Brackets Increase
2026 brings higher federal tax brackets:
- 12% → 15%
- 22% → 28%
- 24% → 31%
New Yorkers earning $75K–$500K will feel the impact most.
High-income professionals in NYC will experience a combined federal + state + city burden significantly larger than in prior years.
QBI Deduction Made Permanent Under OBBBA
OBBBA permanently preserved the 20% Qualified Business Income (QBI) deduction for:
- LLCs
- S-Corps
- sole proprietors
- independent contractors
- certain rental operations
This is a major benefit to small business owners and self-employed New Yorkers; however, New York does not apply a matching state-level QBI deduction.
Beginning in 2026:
- updated QBI income thresholds apply
- SSTB phaseouts are revised
- documentation and compliance standards increase
New York business owners should review QBI planning before the year ends.
Child Tax Credit Shrinks
Starting in 2026:
- the federal Child Tax Credit drops from about $2,000
- to roughly $1,000 per child
- refundability decreases
Families in NYC, Long Island, and Westchester — already carrying high household expenses — will feel this change strongly.
Marriage Penalty Returns
TCJA’s marriage penalty relief expires in 2026.
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New York has a high concentration of dual-income households, especially in:
- Manhattan
- Brooklyn
- Queens
- Westchester
- Nassau
- Suffolk
In 2026, married couples:
- reach higher brackets sooner
- lose deductions faster
- lose credit eligibility more quickly
This increase in federal taxable income also raises NY State and NYC tax liability.
New York–Specific Tax Considerations
1. New York State Uses Federal AGI as the Starting Point
Because New York begins tax calculations at federal AGI:
- lower federal deductions
- higher federal taxable income
- reduced credits
…automatically increase New York State taxable income.
This affects every taxpayer at every income level.
2. NYC Residents Face Additional Local Tax Burdens
Residents of New York City pay:
- federal tax
- New York State tax
- New York City resident income tax
With 2026 increases, NYC workers will see some of the highest combined tax rates in the country .
3. Real Estate Investors See Significant Federal Changes
New York’s real estate markets — including NYC, Long Island, Westchester, Albany, Buffalo, and the Hudson Valley — will be affected through:
- higher capital gains
- depreciation rule changes
- STR participation requirements
- tighter rental loss rules
- timing of property sales and exchanges
OBBBA preserved QBI, but did not prevent TCJA capital gains thresholds from expiring.
4. STR (Short-Term Rental) Owners Must Prepare for New Rules
Short-term rental activity across:
- NYC (where permitted)
- Catskills and Hudson Valley
- Adirondacks
- Finger Lakes
- Long Island beaches
will face:
- reduced bonus depreciation
- stricter participation requirements
- updated safe harbor rules
- stronger IRS documentation standards
5. Retirement Income in New York Is Significantly Affected
New York offers some exemptions for pensions and Social Security, but many retirees pay state tax on retirement income.
2026 federal changes impact:
- IRA withdrawals
- pension income
- 401(k) distributions
- taxable investment withdrawals
Higher federal brackets increase overall retirement tax burdens.
Who Is Most Affected in New York (2026)
- Dual-income households in NYC and suburbs
- High-income professionals
- Small business owners and contractors
- Real estate investors and landlords
- Real estate investors
- STR hosts
- Families with children
- Retirees with taxable withdrawals
- Middle-income urban and suburban earners
What New York Residents Should Do Before December 31, 2025
- Review federal, state, and city withholding
- Maximize retirement contributions
- Consider Roth conversions
- Review LLC/S-Corp structures for QB
- Document STR and rental participation thoroughly
- Evaluate capital gains exposure
- Plan timely real estate or investment sales
- Build a coordinated federal + NY State + NYC tax strategy
New York 2026 Tax FAQ
Does New York conform to QBI?
No. QBI is federal-only.
Will New York State taxes rise?
Rates do not change, but taxable income rises due to federal changes.
Are NYC residents affected?
Yes — heavily. Higher AGI increases both state and city taxes.
Are families impacted?
Yes. Child Tax Credit reductions and higher taxable income reduce refunds.
Are retirees affected?
Yes. Higher federal brackets increase the tax cost of retirement withdrawals.
Are STR owners affected?
Yes. Depreciation and participation rules are more restrictive.
Get 2026 New York Tax Strategy today.
New York residents face some of the most significant tax impacts in the country as 2026 approaches.
Higher brackets, reduced deductions, credit changes, and the expiration of TCJA force both federal and state liabilities higher.
A personalized strategy ensures you are prepared before the new rules take full effect.