This guide explains how taxes work in New York, and how you can optimize your tax burden effectively.
Как работают налоги в Нью-Йорке. Фото: unsplash.com

How do taxes work in New York? Navigating New York’s tax system can be complex, with its mix of state, city, and specialized taxes.

How Taxes Work in New York

This guide simplifies the essentials, covering income, property, sales, and corporate taxes while highlighting deductions and credits to help you reduce your tax burden. Whether you’re a resident, self-employed, or a property owner, this article will help you stay compliant and manage your taxes efficiently.

Tax Types in New York

New York residents must pay a variety of taxes. These include:

  • Income Tax: State and city income taxes.
  • Sales Tax: Tax on goods and services.
  • Property Tax: Taxes for homeowners based on property value.
  • Corporate Tax: For businesses operating within the state.
  • Capital Gains Tax: Tax on profits from investments.

Income Tax in New York

State Income Tax

New York has a progressive income tax system. Tax rates vary based on income, ranging from 4% to 10.9%. Higher earners pay a greater percentage of their income in taxes.

Residents file state income taxes annually by April 15. Employers deduct income taxes from employee paychecks as withholding tax.

New York State Income Tax Brackets (2025)

Taxable Income (Single Filers) Taxable Income (Married Filing Jointly) Tax Rate
$0 – $8,500 $0 – $17,150 4.00%
$8,501 – $11,700 $17,151 – $23,600 4.50%
$11,701 – $13,900 $23,601 – $27,900 5.25%
$13,901 – $21,400 $27,901 – $43,000 5.85%
$21,401 – $80,650 $43,001 – $161,550 6.25%
$80,651 – $215,400 $161,551 – $323,200 6.85%
$215,401 – $1,077,550 $323,201 – $2,155,350 9.65%
$1,077,551 – $5,000,000 $2,155,351 – $5,000,000 10.30%
$5,000,001 and above $5,000,001 and above 10.90%

New York City Income Tax

If you live or work in New York City, you must also pay city income tax. The rates range from 3.078% to 3.876%, depending on your income.

Sales Tax

New York State imposes a 4% sales tax on most goods and services. Counties and cities can add their own sales taxes, leading to a combined rate of up to 8.875% in New York City.

Property Tax

Homeowners in New York pay property taxes based on the assessed value of their property. Rates vary by county and municipality, with the statewide average property tax rate being approximately 1.4%.

Property taxes fund local services such as schools, police, and infrastructure maintenance.

Capital Gains Tax

Capital gains—profits from investments such as stocks or real estate—are taxed as income in New York. They are subject to both federal and state income tax rates. Long-term capital gains (investments held for more than one year) are taxed at lower federal rates but remain subject to New York’s income tax.

Corporate Tax

Businesses operating in New York must pay corporate taxes. The state imposes a 6.5% tax on corporate income. New York City has an additional corporate tax of 8.85% for businesses operating within city limits.

Other Taxes

  • Sales and Use Tax: Applies to items purchased out of state but used in New York.
  • Estate Tax: Levied on estates worth more than $6.58 million (as of 2025).
  • Vehicle Tax: Annual registration fees and taxes based on vehicle weight and value.
  • Cigarette and Alcohol Taxes: High excise taxes on cigarettes and alcoholic beverages.

Income and Salary Tax in New York

In New York, residents are required to pay state income tax, which is calculated as a percentage of their income. New York follows a progressive tax system, meaning that higher earners pay a larger percentage of their income in taxes.

For 2025, tax rates range from 4% to 10.9% depending on your taxable income. Additionally, if you live or work in New York City, you are subject to an additional city income tax, ranging from 3.078% to 3.876%.

If you are an employee, state and city income taxes are deducted directly from your paycheck as withholding tax. This serves as a prepayment of your estimated annual income tax. If too much tax is withheld, you can file a tax return to claim a refund.

Unlike in some states, tips earned by employees in New York are considered taxable income and must be reported when filing your tax return.

New York’s progressive tax system ensures that residents contribute fairly based on their earnings while providing opportunities to reclaim overpaid taxes through proper filing.

How to Pay Taxes in New York

If you are an employee, your employer deducts taxes from your paycheck and remits them to the state. Self-employed individuals and freelancers must estimate and pay taxes quarterly. Failure to pay taxes on time may result in penalties and interest.

New York Tax Deductions and Credits

To lower your tax burden, you can take advantage of deductions and credits:

  • Standard Deduction: Reduces taxable income.
  • Child and Dependent Care Credit: Helps offset childcare costs.
  • Earned Income Tax Credit (EITC): For low- to moderate-income earners.
  • Property Tax Relief Credit: For eligible homeowners.

How to Pay Less Taxes in New York

Here are some strategies to reduce your tax burden:

  • Contribute to a 401(k) or IRA: Retirement contributions reduce taxable income.
  • Claim All Eligible Tax Credits: Ensure you apply for credits like the EITC or child tax credit.
  • Utilize Property Tax Exemptions: Programs such as STAR (School Tax Relief) reduce property taxes for eligible homeowners.
  • Keep Accurate Records: Track deductible expenses such as business costs or charitable contributions.

Conclusion

New York’s tax system can seem complex, but understanding the basics helps you plan your finances better. Whether you’re a resident, a business owner, or a freelancer, knowing what taxes you owe and how to minimize them ensures compliance and maximizes your financial well-being.

Read more: Net Salary in New York — What’s Left After Taxes.

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