Business Tax in New York: Complete Guide 2026
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Business Tax in New York: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
New York imposes a multi-layered business tax system that includes a state corporate franchise tax of approximately ~7.25%, a temporary corporate surcharge, and — for businesses operating in New York City — an additional city-level corporate tax of approximately ~8.85%. Combined, businesses operating in NYC can face effective corporate tax rates approaching ~16.00% to ~17.00%, among the highest in the nation. Understanding the state and city components is essential for any business operating in New York.
New York Business Tax Overview (2026)
| Tax Type | Rate / Structure |
|---|---|
| Corporate franchise tax (state) | ~7.25% |
| Temporary corporate surcharge | ~0.75% (projected; subject to legislative renewal) |
| NYC general corporation tax | ~8.85% |
| NYC unincorporated business tax (UBT) | ~4.00% |
| Pass-through entity tax (PTET) | ~6.85% to ~10.90% |
| Personal income tax (pass-through owners) | Up to ~10.90% state + ~3.876% NYC |
| Sales tax | ~4.00% state + local |
| Metropolitan commuter transportation mobility tax | ~0.34% of payroll (NYC metro) |
State Corporate Franchise Tax
New York’s corporate franchise tax is calculated as the highest of three alternative bases:
| Base | Rate |
|---|---|
| Business income base | ~7.25% of allocated NYS net income |
| Capital base | ~0.04% of business capital (capped at ~$5 million) |
| Fixed dollar minimum | ~$25 to ~$200,000 based on NYS receipts |
Most profitable businesses pay on the business income base. The capital base serves as an alternative minimum for capital-intensive businesses, and the fixed dollar minimum catches businesses with little or no income.
Temporary Surcharge
New York enacted a temporary corporate surcharge of approximately ~0.75% for businesses with taxable income over ~$5 million. This surcharge brings the effective state rate to approximately ~8.00% for larger businesses. The surcharge has been renewed multiple times and may continue into 2026.
New York City Business Taxes
Businesses operating in New York City face additional city-level taxes:
General Corporation Tax (GCT) / Business Corporation Tax (BCT)
| Entity Type | NYC Tax Rate |
|---|---|
| C Corporations | ~8.85% |
| S Corporations | ~8.85% (with some modifications) |
Unincorporated Business Tax (UBT)
| Entity Type | NYC UBT Rate | Exemption |
|---|---|---|
| Sole proprietors, partnerships, LLCs | ~4.00% | ~$95,000 per year |
The UBT is one of the most unusual local business taxes in the nation. It applies to unincorporated businesses (sole proprietors, partnerships, LLCs that have not elected corporate treatment) operating in NYC. The first approximately ~$95,000 of unincorporated business income is exempt.
Combined NYC and State Rates
| Entity | State Rate | NYC Rate | Combined |
|---|---|---|---|
| C Corporation | ~7.25% + ~0.75% surcharge | ~8.85% | ~16.85% |
| Unincorporated business (NYC) | N/A (pass-through) | ~4.00% UBT | ~4.00% + personal income tax |
| S Corporation (NYC) | Pass-through | ~8.85% | ~8.85% + personal income tax |
The combined ~16.85% corporate rate for NYC-based C corporations is among the highest in the nation.
Pass-Through Entity Tax (PTET)
New York offers an electable PTET for partnerships, S corporations, and LLCs. The PTET allows the entity to pay New York income tax at the entity level at graduated rates:
| Taxable Income | PTET Rate |
|---|---|
| Up to $2,000,000 | ~6.85% |
| $2,000,001 — $5,000,000 | ~9.65% |
| $5,000,001 — $25,000,000 | ~10.30% |
| Over $25,000,000 | ~10.90% |
Electing PTET provides a workaround for the federal $10,000 SALT deduction cap, allowing pass-through owners to effectively deduct state taxes above the cap.
Metropolitan Commuter Transportation Mobility Tax (MCTMT)
Employers in the NYC metropolitan commuter transportation district (MCTD) pay a payroll tax of approximately ~0.34% on all covered payroll. Self-employed individuals with net earnings above approximately ~$50,000 also owe the MCTMT.
Comparison to Other Major Business States
| State/City | Corporate Tax | City Tax | Combined Max |
|---|---|---|---|
| New York (NYC) | ~8.00% | ~8.85% | ~16.85% |
| California | ~8.84% | None (state) | ~8.84% |
| Illinois | ~9.50% | None (state) | ~9.50% |
| New Jersey | ~11.50% (>$1M) | None | ~11.50% |
| Texas | ~0.75% margin tax | None | ~0.75% |
| Florida | ~5.50% | None | ~5.50% |
New York City’s combined ~16.85% corporate tax rate is by far the highest of any major U.S. city.
Tips for Minimizing New York Business Tax
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Elect the PTET. For pass-through entities, the PTET election provides a SALT cap workaround. The entity-level deduction offsets the federal limitation on individual state tax deductions.
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Evaluate NYC vs. suburban locations. Operating outside NYC eliminates the ~8.85% GCT and ~4.00% UBT. Businesses in Westchester, Long Island, or New Jersey face significantly lower combined rates.
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Optimize apportionment. New York uses market-based sourcing. Revenue from out-of-state customers is not taxed by New York. Expanding your customer base nationally reduces your New York tax liability.
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Plan for the UBT exemption. Unincorporated businesses with NYC income below approximately ~$95,000 are exempt from the UBT. This exemption benefits small freelancers and consultants.
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Consider entity structure. The interaction between state corporate tax, NYC corporate tax, UBT, and personal income tax varies significantly by entity type. Model multiple structures before choosing.
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Claim available credits. New York offers various business tax credits including the R&D credit, investment tax credit, and Excelsior Jobs Program credit for qualifying businesses.
Key Takeaways
- New York State’s corporate franchise tax is approximately ~7.25% to ~8.00% (with surcharge)
- New York City adds up to ~8.85% for corporations and ~4.00% UBT for unincorporated businesses
- The combined NYC corporate rate of approximately ~16.85% is the highest of any major U.S. city
- The Pass-Through Entity Tax provides a SALT cap workaround at rates of ~6.85% to ~10.90%
- Operating outside NYC significantly reduces the business tax burden
- Market-based sourcing means revenue from out-of-state customers is not taxed by New York
Next Steps
- Compare sales tax at Sales Tax in New York 2026
- See the full state guide at Taxes in New York: State Tax Guide 2026
- Explore estate tax at Estate Tax in New York 2026
- Read the small business guide at Small Business Tax Guide
- Get professional help: Hire a Tax Professional