New York's FY 2026-27 budget introduces tip income tax exemption, a new surcharge on luxury second homes valued at USD 5 million or more, expanded child credits, and energy rebates as the state moves to ease cost-of-living pressures on workers and families while tapping high-end real estate for fresh revenue.
New York Governor Kathy Hochul signed the New York State Fiscal Year 2027 Budget on 28 May 2026. This legislative package is designed to address the rising cost of living while funding critical public safety and infrastructure initiatives.
While the budget touches on many sectors, its tax provisions are particularly focused on providing relief to the workforce, expanding credits for families, and introducing new surcharges on luxury real estate.
The key measures are as follows:
Modernising personal income and property taxes
The budget introduces a significant shift in how personal income is treated for service industry workers and how high-value property is taxed in metropolitan areas.
Tax relief for tipped workers: In a first-in-the-nation move, New York will eliminate state income taxes on up to USD 25,000 of tipped income for bartenders, servers, and “deliveristas” starting in the 2026 tax year. This policy is designed to keep more hard-earned cash in the pockets of the state’s service economy backbone.
This measure aligns with federal guidelines under the “One Big Beautiful Bill Act,” signed into law on 4 July 2026.
The “Pied-à -Terre” luxury surcharge: One of the most discussed elements of the new budget is the implementation of a surcharge on luxury second homes within New York City, often referred to as the “Pied-à -Terre” tax. To generate revenue for essential services, the state has implemented a new tax on luxury second homes in New York City valued at USD 5 million or more.
The surcharge is expected to generate at least USD 500 million in recurring annual revenue.
Covered cooperatives and condominiums: The rates for covered cooperatives and condominiums during “Phase 1” are determined by Department of Finance market-value assessments as follows:
- 4% for properties valued between USD 1 million and USD 3 million.
- 5.25% for properties valued between USD 3 million and USD 5 million.
- 6.5% for properties valued above USD 5 million.
Initial rollout for family homes: For luxury one, two, and three-family homes, the tax rates during the initial rollout phase are:
- 0.8% for properties valued between USD 5 million and USD 15 million.
- 1.05% for properties valued between USD 15 million and USD 25 million.
- 1.3% for properties valued above USD 25 million.
Property tax relief for seniors and the disabled: The budget significantly expands eligibility for the Senior Citizen Rent Increase Exemption (SCRIE), the Disability Rent Increase Exemption (DRIE), and similar homeowner programs. Income eligibility limits for these “rent freeze” and exemption programs have been raised from USD 50,000 to USD 75,000, ensuring that more vulnerable New Yorkers can stay in their homes despite rising costs.
Family credits and energy rebates
A cornerstone of the FY 2027 plan is the “Empire State Child Credit” and direct energy subsidies, which aim to alleviate the financial burden on middle-class and low-income families.
- Expanded child tax credits: Beginning in 2026, the Child Tax Credit for children under the age of four will increase from USD 330 to USD 1,000 annually. For school-aged children, the credit will rise to USD 500 starting in 2027.
- The POWER rebate program: To combat surging utility bills, the state is issuing one-time “Protecting Our Wallets Energy Rebate” (POWER) checks. Joint filers with an annual income under USD 150,000 will receive USD 200, while those earning between USD 150,000 and USD 300,000 will receive USD 150. This is part of a broader USD 1 billion energy relief initiative.
Targeted agricultural and economic adjustments
While the sources do not detail specific changes to broad corporate tax rates, Value Added Tax (VAT), or customs duties (which are largely federal), the budget does include targeted measures to offset external economic pressures on New York businesses.
- Agricultural support against tariffs: To shield farmers from the rising costs of seeds and machinery caused by federal trade policies, the budget creates the USD 30 million Agricultural Resiliency Against Tariffs Program. This provides direct payments to speciality crop, dairy, and livestock producers to maintain their competitiveness in the global market.
- Insurance and benefit adjustments: While not a direct tax, the budget mandates new regulatory safeguards to prevent insurance companies from raising auto rates based on personal factors like zip code or education level. Additionally, maximum weekly unemployment benefits have been increased by USD 300 to better support New Yorkers between jobs.
