New York eliminates state income tax on first $25,000 of tips

New York's service workers will see a significant boost to their take-home pay as Governor Kathy Hochul confirmed the elimination of state income tax on the first $25,000 of tips. This policy change, set to take effect for the 2026 tax year, aims to put more money directly into the pockets of thousands of employees in the service sector.

The "No Tax on Tips" provision, approved as part of the federal One Big Beautiful Bill Act in 2025, allows eligible taxpayers to exclude up to $25,000 in tip income when calculating their state income tax. This move is expected to provide substantial financial relief, enabling workers to better cover daily expenses.

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Less taxes. Bigger paychecks. We are eliminating state income taxes on up to $25,000 in tip income. That means $67 million back in New Yorkers' pockets.

Governor Hochul highlighted the economic impact on workers via her official X account, stating, "Less taxes. Bigger paychecks. We are eliminating state income taxes on up to $25,000 in tip income. That means $67 million back in New Yorkers' pockets." The state administration emphasizes that tipped workers, including waiters, bartenders, and delivery personnel, are vital to New York's service economy.

This tax relief is integrated into the state's fiscal year 2027 budget, which took effect on April 1, 2026. Hochul asserted that the budget's proposals prioritize the needs of working families, public safety, and economic opportunities for all residents.

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We presented an ambitious agenda that will lower costs for working families, keep New Yorkers safe, and create opportunities for all.