NYC PTET Credit Cut 75 Percent April 2026: NYC Asks Albany to Cut the City PTET Credit to 75%
The Mechanic — and Why a 25-Point Cut Hurts
The NYC PTET regime today gives city residents who pay through a New York State Pass-Through Entity Tax (PTET) election a credit equal to 100% of the city tax allocable to their share. That symmetry is what makes the election worth doing in NYC: the entity-level tax is fully deductible federally as a SALT workaround under the OBBBA-revised cap rules, and the resident gets the full city-level offset. Net: federal benefit, no in-state pain.
Cut the credit to 75% and the math flips. The city resident still pays their share of the city tax through the entity, but only gets credit for three-quarters of it. The remaining quarter sticks. For a partner pulling $1M of NYC-source pass-through income, that is roughly $9,000 of additional out-of-pocket city tax per year, ignoring rounding and complexities in the apportionment math.
This is a stealth tax increase on closely held NYC businesses. It does not move the headline rate. It does not show up in a budget table as a “tax hike.” It moves a credit percentage. Every owner-operator who structured around the existing PTET symmetry will feel it on the 2026 NY return they file in 2027 — assuming the cut survives the budget endgame.
What This Means for NYC Business Owners
If you are a Reedcorp business-owner client running a NYC-based S-corp or partnership, this is the single most important state-level item on the table for your 2026 planning. It does not change federal SALT math. It does not change your QBI deduction. It changes the back-end of the SALT workaround that everyone with NYC-source pass-through income has been using since the city PTET was synced in 2022.
Three groups feel it most:
- Solo professional services owners (lawyers, consultants, doctors operating through PCs/PLLCs, investment advisors). The pass-through is the income, the income is mostly NYC-source, and the credit cut is a direct hit. No structural workaround.
- Real estate operators with NYC properties. Even if the operating company is set up outside NYC for other reasons, partner residents of NYC are subject to the city tax on allocable income. A 75% credit shifts the post-PTET economics meaningfully.
- Mid-market closely held businesses with several NYC-resident partners. The PTET election is shared at the entity level but the credit is taken at the partner level. A change to the credit math changes the after-tax distribution to NYC-resident partners only — which can create unexpected friction at the partnership level if not modeled.
Non-Resident Partners — Mostly Unaffected
If you live in NJ, CT, FL, or anywhere outside NYC and your share of the NY entity tax is allocated to NYC-source income, you are largely outside the city tax regime. The state-level PTET still works. The federal SALT workaround still works. The 75% credit cut affects the credit for NYC residents specifically.
Where This Sits in the Albany Endgame
The state budget was due April 1. The Legislature passed a seventh extender on April 27 to keep operations running through April 30. The PTET credit cut is one of several revenue items on the table — alongside a high-earner income surcharge, the proposed pied-a-terre tax on $5M+ NYC residential property, and a few smaller items. Albany may take some, all, or none of these.
For NYC, Mamdani and Menin pushed the city’s own FY27 Executive Budget extender to May 12 to absorb whatever Albany decides. The city is signaling that the PTET cut is not a wish list — it is what they need to close their gap.
Realistic outcomes range from “credit goes to 75% as proposed”. To “credit goes to 90%”. To “no cut this year and revisit in the FY28 budget cycle.” The firm’s working assumption is that some haircut survives, even if the specific 75% number does not.
If you are doing 2026 planning right now and assuming the 100% credit holds: stop. Model both the 100% and the 75% scenarios at minimum. The chance the credit emerges from the budget unchanged is meaningful but not majority. Build the contingency now, not in November.
What We Are Doing for Reedcorp Clients
For NYC business-owner clients, the firm is updating quarterly projection models with two scenarios: PTET credit at 100% (status quo) and PTET credit at 75% (proposal as written). For real estate clients with NYC partnerships and outside investors, we are also flagging this for the LP communication in the next quarterly distribution letter — outside investors who don’t track Albany news will be surprised by a smaller distribution if the math changes mid-year.
The longer-term question is whether this is the start of NYC chipping away at the SALT workaround generally. If the answer is yes, owner-operators should be looking now at whether moving residence outside NYC — Westchester, Long Island, NJ — actually pencils out for them. The firm has had this conversation more times in the last six months than in the prior two years combined. Read our SALT cap workarounds piece for the broader federal architecture and our QBI deduction guide for the federal pieces that interact with PTET.
Our business-owner, real estate, and HNW teams coordinate on PTET planning alongside the firm’s New York tax strategy practice.
Common Questions
Does this affect my 2025 return?
No. Any PTET credit change Albany passes in this budget cycle would apply to 2026 forward, not retroactively to 2025 returns now being filed.
Should I undo my PTET election?
Almost certainly not. Even at a 75% credit, the federal SALT deduction makes the election positive for most NYC-resident pass-through owners. The math gets less attractive, not negative.
What if the cut goes deeper — say, to 50%?
That has not been formally proposed. If it were, the planning conversation changes meaningfully and includes residency, entity structure, and timing of distributions.
Does this hit C-corps?
No. The PTET regime applies only to partnerships and S-corps that elect into it. C-corps file the standard NYC General Corporation Tax (GCT) and are unaffected by this proposal.
How fast will Albany decide?
Each extender has been week-to-week. A real budget could land any day. Or it could slip into mid-May. The firm will update clients when there is something definitive to update on.
Does the firm think the 75% number sticks?
Probably not at exactly 75%. A compromise around 85–90% is more likely if a cut happens at all. But the direction of travel is clearly down from 100%, and clients should plan for a partial cut as the base case.
Source
Joint statement from Mayor Mamdani and Council Speaker Menin on the PTET credit and FY27 budget extender: NYC Council Press Office (April 28, 2026). Background on the existing NYC PTET regime is at the NYC Department of Finance and the NYS Department of Taxation and Finance.
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Sources & References
Frequently Asked Questions
What is the nyc ptet credit and what was proposed in April 2026?
The nyc ptet credit lets a New York City resident who is a partner or S corporation shareholder claim a credit on the city personal income tax for their share of pass through entity tax the business paid. In late April 2026, Mayor Mamdani and Council Speaker Menin urged Albany to cut that credit from 100 percent to 75 percent. On April 28, 2026, they stood together at City Hall pushing the Governor and Legislature to act in the state budget. The cut would raise roughly 700 million to nearly 1 billion dollars for the city by leaving part of the pass through tax uncredited. It is a proposal, not a law. Governor Hochul pushed back on the request during the budget standoff. Sources. New York State Department of Taxation NYC PTET page and the New York City Council April 28, 2026 statement.
Who does the nyc ptet credit cut affect?
The nyc ptet credit cut would hit high income owners of pass through businesses who live in New York City. Filers reporting at least 1 million dollars claimed about 95 percent of the city’s 2023 pass through entity tax credits, so the burden lands mostly on them. Hedge fund, private equity, law firm, and other partnership owners are the clearest targets. If you own a partnership or S corporation interest and pay city tax, a move to a 75 percent credit means 25 percent of your pass through tax would no longer offset your city bill. Wage earners with no pass through income are not directly affected. Plan with your CPA if you fall in the high income owner group.
What is the nyc ptet credit reduction and how much revenue would it raise?
The nyc ptet credit cut would drop the city credit from 100 percent to 75 percent of the pass through entity tax allocated to a resident owner. That 25 percentage point reduction is the whole change. The pass through entity tax itself and the state credit are not the target here. City estimates put the new revenue between about 700 million and nearly 1 billion dollars a year. There is no dollar threshold written into the proposal. It applies to the credit percentage across affected city resident owners. Because most of the credit value flows to filers above 1 million dollars in income, that is where the real cost would concentrate.
What changed with the nyc ptet credit, and did the cut pass?
As of late April 2026, nothing about the nyc ptet credit has actually changed in law. The 100 percent city credit still stands. The reduction to 75 percent was endorsed in both legislative chambers’ one house budget proposals, which is a negotiating position, not a final budget. Mayor Mamdani and Speaker Menin asked Albany to include it in the enacted state budget. Governor Hochul refused the request during the budget showdown, so the change was not adopted at that point. Treat the 75 percent figure as proposed. Watch the final state budget language before changing any estimated payment or planning move.
What should I do about the proposed nyc ptet credit cut?
If the nyc ptet credit cut concerns you, first confirm whether you are a city resident owner of a pass through entity, since that is who it touches. Model your city tax both ways, at the current 100 percent credit and at a 75 percent credit, so you know the dollar exposure. Do not change 2026 estimated payments based on a proposal that has not passed. Keep your pass through entity tax elections and state credit documentation clean so you can react fast if Albany adopts the cut. Watch the enacted state budget for the final credit percentage. We can run the numbers on your specific entity and city return. Reach out for a planning review. See our tax strategy consulting service.