NYC Reduces UBT Credit for High-Income Taxpayers Beginning in 2026

New York City (NYC) has retroactively enacted legislation that significantly reduces the Unincorporated Business Tax (UBT) credit available to higher-income taxpayers. The change may increase NYC personal income tax liabilities for affected individuals and could necessitate adjustments to 2026 estimated tax payments.

What Changed?

Under newly enacted Local Law 133, NYC has reduced the UBT credit available to taxpayers with City taxable income exceeding $1 million. The change to the Administrative Code of the City of New York Sec. 11-1706 became effective last month after the NYC Council approved the measure and the Mayor returned it without signature.

Importantly, the change applies retroactively to January 1, 2026.

Previous UBT Credit Rules

Prior to this legislation, taxpayers subject to the NYC UBT were eligible for a personal income tax credit ranging from 100% of UBT liability for taxpayers with NYC taxable income of $42,000 or less to 23% for taxpayers with NYC taxable income of $142,000 or more.

New UBT Credit Limits

The new law preserves the existing credit structure for taxpayers with less than $1 million of NYC taxable income. However, for higher-income taxpayers:

• NYC taxable income between $1 million and $1.25 million: The UBT credit will gradually phase down from 23% to 15%.
• NYC taxable income of $1.25 million or more: The UBT credit is reduced to 15%.

As a result, affected taxpayers will receive a smaller credit against their NYC personal income tax liability, which may lead to increased tax obligations.

Planning Considerations for 2026

Since the law is retroactive to January 1, 2026, taxpayers who are impacted should review their current tax projections and consider whether adjustments to estimated tax payments are warranted. Increases to third and fourth quarter estimates may be required.

Next Steps

We recommend that clients with anticipated NYC taxable income in excess of $1 million contact their tax advisor to evaluate the effect of this change on their 2026 tax position.

For more information, please contact Alan Goldenberg or your Baker Tilly x Anchin Relationship Principal.