New York State’s 2025 Fiscal Year Budget

After weeks of deliberation and extensions, New York State lawmakers have finally passed the state’s 2025 fiscal year budget, totaling to a record $237 billion. The delays were due to negotiations surrounding many non-tax agenda items.

Unlike in the past few years, this year’s budget will not include any increases in individual or business taxes. Much of the focus of the 2025 budget includes funding to confront issues in healthcare, mental health services, public safety, education, and artificial intelligence. However, regarding taxes the budget addresses the following:

• Cannabis taxes. The lawmakers approved to do away with the THC potency tax regime and replace it with a 9% excise tax at the wholesale level. Additionally, effective June 1, 2024, the law reduces the excise tax on medical cannabis from 7% to 3.15%.
• High-income itemized deduction limit. The itemized deduction limitation on individuals with adjusted gross incomes over $10 million, which limits the allowed Federal charitable contribution deduction to 25%, is extended through 2029.
• Metropolitan Commuter Transportation Mobility Tax (MCTMT). The budget clarifies that for tax years beginning on or after January 1, 2024, the MCTMT will continue to apply to self-employed individuals, located in Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester counties, at the current rate of 0.34%.
• Commercial security credit. Certain businesses may qualify for a new security tax credit of $3,000 for each business retail entity location within New York State. An eligible business must have qualified retail theft prevention measure expenses that exceed $4,000 (if 25 or fewer employees) or $6,000 (if more than 25 employees) for each New York retail location. The credit is available for taxable years beginning on January 1, 2024 through January 1, 2026.

The budget also takes aim at the real estate industry to address multiple issues impacting landlords, tenants, and developers:

• The new budget introduces Section 485-x, known as the “Affordable Neighborhoods for New Yorkers” program, that replaces the 421-a incentive program which expired in 2022. This new program will exempt the construction of qualified multi-family dwellings from real property taxes in cities with populations of 1 million or more.
  • Some qualifications include meeting certain construction wage standards and leaving income-restricted units as permanently affordable.
  • The size of the building constructed will affect how many units will need to be set aside as affordable, and the duration of the tax abatements, which ranges from 10 years to 40 years.
• For projects already enrolled in the 421-a incentive prior to its expiration, the budget extends the program for an additional six years. This means that developers who broke ground before June 15, 2022, have until June 15, 2031 to complete the projects.
• The budget also eases regulations and provides tax incentives to convert unused office space into affordable housing. Such tax abatements could last up to 35 years.
• The residential floor area ratio (FAR) density cap in New York City will be lifted, which will result in the rezoning of certain buildings.
• Under the new measures, tenants can challenge evictions resulting from rent increases greater than 10% of the existing rent or 5% of the consumer price index (CPI), whichever is lower. This policy automatically applies in New York City; localities outside can opt in.

Be on the lookout for follow up Anchin alerts providing an in-depth analysis of the new real estate-related programs and the cannabis tax changes. For more information on the tax implications contained within New York’s 2025 fiscal year budget, please contact Alan Goldenberg, Principal and Leader of the State and Local Tax and Tax Controversy groups, or your Anchin Relationship Partner.