A large swath of New Yorkers could benefit from a major tax cut aimed at middle-class workers, but is it too good to be true?
Gov. Kathy Hochul pledged a middle-class tax cut that would deliver nearly $1 billion in tax relief to more than 8.3 million New Yorkers. The measure would provide immediate savings to taxpayers earning up to $323,000 for joint filers, and cut rates across five of the state’s nine tax brackets.
The proposal would lower middle-class taxes to the lowest level in nearly 70 years, according to Hochul. Once in place, the middle-class tax cut is estimated to provide hundreds of dollars in average savings for 77% of state filers — that’s three out of every four taxpayers.
If passed into law, the tax cut would take effect in the current tax year and immediately be reflected in the rates on your paycheck.
The governor’s plan was announced as part of her 2025 State of the State, along with other broad pitches including increasing the Empire State Child Credit, and a first-of-its-kind inflation refund.
Gov. Hochul’s latest tax plans come as state lawmakers argue New Yorkers may need to brace for more taxes and fees to supplement the Metropolitan Transportation Authority’s (MTA) budget shortfall. They also come at the heels of a new congestion pricing toll, which has lost the governor some favor among Manhattan’s commuters.
Here’s what you should know about the governor’s plans for New York taxes in 2025.
New York Inflation Refund
It’s no secret that inflation has been a sour note for New Yorkers. From higher prices at the grocery store for milk and eggs to higher prices on clothing or events. Many locals have had to make adjustments to their spending to keep up with their daily expenses.
New York also levies a 4% state sales tax, with an average combined state and local sales tax rate of 8.53%. That’s among the highest state sales taxes in the country.
“Because of inflation, New York has generated unprecedented revenues through the sales tax — now we’re returning that cash back to middle-class families,” Gov. Hochul said in a statement accompanying the release of her budget plans. “It’s simple: the cost of living is still too damn high, and New Yorkers deserve a break.”
To put more money back into your pockets, Gov. Hochul pitched the state’s first-ever inflation refund. The measure would deliver $3 billion in refunds back to 8.6 million New York taxpayers. If passed, the checks may reach you as soon as the year-end.
Who would benefit from the one-time New York Inflation Refund?
- Joint filers who earn $300,000 or less would receive a $500 refund check
- Single taxpayers who earn $150,000 or less would receive a $300 check
Tripling the Empire State Child Credit
Millions of children in New York benefit from the state child tax credit, known as the Empire State Child Credit.
Gov. Hochul plans to double or triple the child tax credit, by increasing the maximum annual credit to $1,000 per child under age 4 and up to $500 per child between the ages of 4 and 16. Under the current structure, families can get up to $330 per child.
As reported by Kiplinger, the proposed Empire State Child Credit expansion would benefit up to 1.6 million New York taxpayers and 2.75 million children.
Can New Yorkers expect tax cuts in 2025?
Gov. Hochul’s proposed tax breaks would be a welcome relief to millions of New York taxpayers. However, if they are likely to happen is up for debate.
Days before the governor released her tax plans, state lawmakers warned that raising taxes for New Yorkers this year wasn’t off the table.
Before Gov. Hochul can address these new tax breaks, legislative leaders have to figure out how to fill the MTA’s multi-billion-dollar budget gap. As reported by Kiplinger, the MTA’s five-year $65 billion capital plan was shot down in December due to a failure to indicate where half of its revenue would come from.
Notably, lawmakers said the newly implemented congestion pricing would not be enough to fill the budget gap.
The concerns come after MTA officials signed off on a new construction plan in September, estimated to be worth $33 billion. The plan scheduled from 2025 to 2029 aims to repair and expand the MTA’s infrastructure.
New York’s budget negotiations are still ongoing and many have tax implications that can impact you directly. Gov. Hochul’s proposed tax breaks still need support from state lawmakers, so stay informed.
