Mamdani Budget Plan Cuts Tax Credit for NYC Business Owners (1)

New York City Mayor Zohran Mamdani wants to cut a tax benefit used by some business owners, as part of broader efforts to close the city’s $5.4 billion budget gap.

Mamdani released an executive budget plan Tuesday that would reduce a personal income tax credit for filers making more than $142,000 who are subject to the city’s unincorporated business tax. The change would generate $68 million annually, city officials said.

New York City officials have the ability to adjust the credit without state approval, city officials said Tuesday. Gov. Kathy Hochul said Tuesday she struck a deal with Mamdani to send $4 billion in aid to the city to help close the city’s budget gap.

Mamdani’s plan would raise a fraction of the $700 million that he and City Council Speaker Julie Menin (D) targeted in April when they called on state officials to shrink the pass-through entity tax credit used by law firms, hedge funds, and other businesses. Hochul said she opposed any changes to the PTET.

Business owners currently can receive a personal income tax credit that’s at least 23% of what they paid in unincorporated business taxes, depending on their income level. Mamdani’s budget would gradually reduce the credit for filers making $142,000 or more, with it bottoming out at 15% for those earning $1 million and more. Roughly 24,000 city taxpayers currently take advantage of the tax benefit, city officials said.

Mamdani’s budget also includes $500 million the state estimates it will raise from instituting a tax on second homes in the city worth more than $5 million. Details of the pied-à-terre levy are still being hammered out by state and city officials, who are struggling with how to structure the tax due to the city’s complex property tax code.

The city budget estimates a roughly $60 million annual loss from allowing taxpayers to deduct up to $25,000 in tipped income, which was approved under the 2025 federal tax law signed by President Donald Trump. Hochul’s budget would preserve the deduction in the state and city tax code.

The state’s fiscal 2027 budget plan is still incomplete almost six weeks past the April 1 deadline, though Hochul said May 7 she reached a tentative deal with lawmakers to include the second-home tax in it.

Mamdani scrapped a plan to raise property taxes by nearly 10% with additional aid expected from the state.