New York’s fiscal year 2027 state budget has been approved, introducing several tax changes primarily affecting businesses and owners of high-value properties.

New Tax on High-Value Second Homes

The budget introduces a New York City “pied-à-terre” tax — a surcharge on certain high-value second homes that are not used as a primary residence. The surcharge applies to condos and co-ops valued above $1 million and 1–3 family homes above $5 million. Property owners can expect notification from the NYC Department of Finance by Aug. 30, 2026, with the first payments due in January 2027. The new tax will be rolled out in two phases, wherein graduated rates will be applied based on property class, followed by a single set of graduated rates to all covered property classes.

City and State Changes to Federal Tax Alignment

The budget includes several “decoupling” provisions, where the state and city both diverge from federal tax rules in the One Big Beautiful Bill Act (OBBBA) and require different calculations for tax purposes.

Most notably, the state will no longer conform to federal rules allowing immediate expensing of research and development (R&D) costs or enhanced bonus depreciation. Instead, businesses must amortize R&D expenses over five years. Pre-2025 expenditures will continue to follow earlier Tax Cuts and Jobs Act (TCJA) rules.

Adding a layer of complexity, New York City is decoupling differently from several federal provisions. The city similarly requires five-year amortization for domestic R&D expenses but continues to follow federal rules requiring 15-year amortization for foreign R&D. It’s also decoupling from bonus depreciation, Section 179 expensing and certain interest limitation rules, creating additional differences for businesses operating in both jurisdictions.

Extension of Current Corporate Tax Rates

The budget also extends New York’s corporate tax rate of 7.25% and capital base tax rate through tax years beginning before Jan. 1, 2030, maintaining the current rate structure for the foreseeable future.

Relief and Compliance Opportunities

To ease the transition, the budget provides penalty and interest relief for taxpayers filing amended returns or extensions to reflect these decoupling changes for 2025.

On the sales tax side, the state is launching a reregistration program through 2030 that will require businesses to renew their sales tax certificates. As part of this effort, eligible taxpayers can receive full penalty relief and a 50% interest reduction on outstanding liabilities.

New York CPAs to Help You Navigate

For taxpayers with exposure in New York, the fiscal year 2027 budget introduces meaningful changes that may increase taxable income and compliance requirements. Look to our New York CPAs for tailored guidance to optimize your personal and business outcomes.