In early May, Governor Hochul signed the FY 2026 New York State Budget into law. The legislation not only calls for expanded investments in education, mental health, crime prevention and expanded education opportunities, but it also includes several important state tax credits. This includes an expanded childcare tax credit, one-time inflation refund checks, and a tax cut for the middle class. The confluence of these updates is designed to ease the financial burden of inflation, while making targeted community investments. To help clients, prospects, and others, Dermody, Burke & Brown, CPAs, has provided a summary of the key information below. 

• Middle Class Tax Cuts – The budget calls for a reduction in the amount of taxes paid by middle class New Yorkers. According to the Governor, the cuts will provide relief to more than 75% of all state tax filers. It includes a rate cut of .2% for the first five income tax brackets over two years. For the 2026 tax year, tax rates for married filing jointly with income not over $323,000 are reduced to a range of 3.9% to 5.9% (where brackets were previously set at 4% to 6%). However, the higher tax rates for high net worth individuals have been extended from 2027 to 2032.

• Inflation Refund Checks – The recently approved budget calls for a one-time inflation refund check to be issued to eligible New York taxpayers. It is designed to provide financial relief to those who have paid more in sales tax due to inflation. To be eligible, for the tax year 2023, a state resident must have filed a New York State Resident Income tax return, reported income within established thresholds and were not claimed as a dependent on another’s tax return. The amount of the refund is determined by the adjusted gross income reported on the 2023 state tax return. For example, married filing jointly taxpayers with less than $150,000 in income will receive $400, but those with more than $150,000 but not more than $300,000 will receive $300. Checks will automatically be mailed starting in Mid-October 2025.  

• Empire State Child Tax Credit – The budget also calls for an enhancement of the Empire State Child Tax Credit. Currently, there is an up to $330 per child credit, depending on household income available to families. Beginning January 1, 2025, the credit is increased to $1,000 for each child up to three years old and $3,300 for those between four and seventeen. The amount of the incentive will change starting January 1, 2026, with a $1,000 credit for each child under three and only $500 for those up to seventeen. These enhanced amounts phase-out on January 1, 2028.

• Historic Rehabilitation Tax Credit Program – There were also changes to the Historic Rehabilitation Tax Credit program. There is now a provision that allows for the transfer of the credit (entirely or in part) between taxpayers with approval from the Office of Parks, Recreation and Historic Preservation. It also removes geographic limitations for affordable housing projects supported by the credit. Prior to these changes, a credit recipient was required to use the credit and there were restrictions on census tracts at or below the state median family income level. 

• Film Tax Credit Programs – There was a significant increase and expansion of the credit designed to attract and retain television and film productions. This includes the establishment of the Production + program which rewards existing programs through 2028. Companies which produce two or more projects and incur at least $100M in eligible expenses will receive an additional 10% incentive for future projects. Independent companies that spend $20M on eligible expenses can receive an additional 5% incentive. There was also an extension of this incentive from 2034 to 2036. Finally, to attract musical score projects, there is an additional 10% incentive for projects that include 5 or more musicians. 

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The tax changes made in the FY 2026 New York State Budget provide new and expanded saving opportunities for families and businesses. The targeted relief provided is certainly welcome news to New Yorkers. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Dermody, Burke & Brown, CPAs, can help. For additional information call 315-471-9171 or click here to contact us. We look forward to speaking with you soon.