Tax insight

New York extends top personal income tax rates, increases MTA payroll tax, updates partnership reporting of federal adjustments

Insight
5 minute read
May 16, 2025

What happened?

New York Governor Kathy Hochul (D) on May 9 signed a final revenue bill, A. 3009-C (legislation), as part of the state’s FY 26 budget that among other provisions will:

Extend the top two personal income tax brackets and rates from 2027 through 2032,
Increase the metropolitan commuter transportation mobility tax rate to 0.895% for employers in New York City with more than $2.5 million in payroll expenses, and
Amend the process for reporting to the state federal tax adjustments resulting from a federal partnership audit or self-reported changes.

Why is it relevant?

The governor’s earlier budget proposal would have made it mandatory for partnerships to report federal audit changes and to pay any resulting New York tax in lieu of having their partners pay. The final bill instead permits taxpayers to elect to report and make payments relating to federal audit changes on their partners’ behalf.

It is important to note that the final legislation does not include the governor’s earlier proposal for extending the deadline from March 15 to September 15 to elect into the New York State and City Pass Through Entity Tax regimes.

The legislation also continues the individual income tax increases adopted in the FY 22 budget, while increasing the MTA payroll tax top rates. However, the legislation does not otherwise include significant new revenue raisers, including proposed individual and corporate tax rate increases included in earlier Assembly and Senate budget proposals.

Actions to consider

Taxpayers with federal partnership adjustments should review the budget legislation to ensure proper compliance and to determine whether it is appropriate to make the payment election. Taxpayers also should consider the impact of changes to the MTA payroll tax rates, including a change to the calculation of the tax due in each of the metropolitan commuter transportation district zones.

It is expected that New York may call a special legislative session this fall to address any issues that may arise because of the federal budget or other potential federal actions. As such, taxpayers should monitor whether any legislative changes may arise later this year.

For more details, read the full Tax Insight linked below.