On April 19, 2021, Governor Cuomo signed the New York State Fiscal Year 2021-22 Budget Bill increasing business and individual tax rates, extending the business capital base tax and enacting the pass-through entity tax, among other changes.
Individual income tax rates
Currently, the highest state income tax rate is 8.82%. The legislation increases the rate to 9.65% on income between $2,155,350 and $5 million for married individuals filing jointly, between $1,616,450 and $5 million for resident heads of household and between $1,077,550 and $5 million for unmarried individuals, married individuals filing separately, estates and trusts.
For individuals with income between $5 million and $25 million, the tax rate will be 10.3% and 10.9% for income over $25 million. These rates apply to all classes of taxpayers. The legislation also updates the state’s tax table benefit recapture provisions to correspond with the new increased rates.
The above-mentioned rates became effective for tax years beginning on or after Jan. 1, 2021 and will be in effect through 2027. As a result, a New York City resident with more than $25 million of taxable income will be subject to the country’s highest combined rate of 14.776%.
At the time of this writing, the New York State Department of Taxation and Finance has not released any guidance as to whether it will abate underpayment penalties.
Article 9-A income tax rates
The corporate income tax rate increased from 6.5% to 7.25% for tax years beginning on or after Jan. 1, 2021 and before Jan. 1, 2024. The corporate rate increase only impacts Article 9-A taxpayers, which include general C corporations, S corporations and financial institutions with a business income base greater than $5 million.
Business capital base extension
Originally scheduled to phase out completely in 2021, the business capital base tax for Article 9-A taxpayers will be extended for three years, except for cooperative housing corporations, qualified New York manufacturers and small businesses. The rate is 0.1875% for tax years beginning on or after Jan. 1, 2021 and ending before Jan. 1, 2024.
Cooperative housing corporations and qualified New York manufacturers and small businesses (defined in NYS Tax Law Section 210.1(f)), is 0% beginning on Jan. 1, 2021. For the remainder of Article 9-A entities, the business capital base tax will now phase out starting Jan. 1, 2024.
Related sections
