Tax Insight

New York City retroactively cuts UBT credit for high-income residents; prior estimated tax payments may warrant review

Insight
5 minute read
August 26, 2026

What happened?

The New York City Council enacted Int. No. 972 on August 18, amending Section 11-1706 of the Administrative Code to reduce the Unincorporated Business Tax (UBT) credit available to city residents with taxable income of $1 million or more. Under the new provision, the credit phases down from 23% to 15% for city residents with taxable incomes between $1 million and $1.25 million, and is capped at 15% above $1.25 million. The law is retroactive to January 1, 2026.

Why is it relevant?

Under prior law, all city resident taxpayers with city taxable income of $142,000 or more received a flat 23% UBT credit regardless of income level. The new law effectively increases the city personal income tax burden on high-earning pass-through business owners by reducing that credit for those with taxable income above $1 million. Because the change is retroactive to January 1, 2026, affected taxpayers may need to adjust estimated payments already made.

Actions to consider

Taxpayers subject to the reduced credit may want to update their 2026 projections and revisit estimated tax payments already made or scheduled for the remainder of the year. For owners of UBT-paying businesses, that analysis should incorporate the lower resident credit and any resulting increase in projected New York City tax obligations. Entity choice also could be considered where the additional city tax cost is material.