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Recent Tax Changes in New York State

Recent Tax Changes in New York State

New York taxes can be complicated, and in a lot of cases, businesses and individuals have to deal with multiple tax jurisdictions in this state. Taxpayers also have to be aware of constant changes in this state's tax code. Wondering what's happening now? Here are some of the latest updates to the New York tax code.

1. New corporate tax rates

For tax years starting after January 1, 2021, and before January 1, 2024, New York State bumped the corporate franchise rate up to 7.25%. This is just .75% higher than the usual rate, and it only applies to businesses with an income base of over $5 million. Additionally, the rate of capital base is 0.1875% for that same time period. With the most recent tax updates New York extended these corporate tax changes to 2027.

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Credit: Getty Images

2. Increase and stabilization of the MCTMT/MTA

The Metropolitan Commuter Transportation Mobility Tax (MCTMT) isn't one of the New York State taxes that applies to everyone. It just applies to businesses and employees in the NYC metropolitan area and some of the surrounding counties. Used to pay for transportation costs, the MTA surcharge applies to businesses that pay franchise taxes, and normally, it increases every year. Recently, however, the state froze the rate at 30% for tax years beginning on or after January 1, 2024. This creates more predictability for businesses

The MCTMT rate also increased from 0.34% to 0.60% for employers. For self-employed people, the rate went from 0.47% to 0.60%, and it applies to net earnings. The legislators also amended the definition of limited partners so that it excludes anyone who participates or takes part in operations -- this means that people who were claiming to be limited partners so they could avoid the MCTMT on distributive shares can no longer exploit that loophole.

3. Changes to income calculations for pass-through entities

Another tax change New York business owners and accountants need to be aware of is a shift in how you compute income for pass-through entities. In the past, pass-through entities such as sole proprietorships, partnerships, and S-corps could subtract taxes paid to anyone but the IRS for federal income tax purposes, and by extension, these taxes were also deductible on the state level.

However, this created a circular situation where pass-through entities were deducting New York taxes while calculating their taxable business income. This has been changed and it applies retroactively to both New York State taxes and New York City taxes. Additionally, the NYC pass-through entity taxes (PTET) now applies to city resident trusts and estates if they're shareholders in s-corps or members of partnerships.

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Credit: Getty Images

4. Tax credit extensions

In its most recent set of tax changes New York has also extended several tax credits. The state increased and extended the film production credit for five years, and it now lasts through 2024. Also extended for five years, the Empire State commercial production credit is now available through 2028. To help the real estate market, the government also extended a reduction for real estate investment trusts (REIT) to September 2026.

5. New appeals processes

The Department of Taxation and Finance (DTF) can now appeal decisions from the Tax Appeals Tribunal. The Commissioner of the DTF can appeal decisions while consulting with the state attorney general on issues that are outside of the scope of the state legislature and that need to be decided based on federal, international, or other state laws.

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