Tax Changes for New Yorkers under the OBBBA
The One Big Beautiful Bill Act of 2025 (OBBBA) introduces some of the most sweeping federal tax reforms in recent memory. While the bill contains too many changes to mention, below is an outline of the most important ones for New Yorkers.
S.A.L.T. Deduction Increase
The big news for New Yorkers is the reinstatement of the SALT deduction. The TCJA limited the amount of state and local taxes that could be deducted for federal income taxes to $10,000, which effectively raised taxes for those living in high-tax states like New York. Under the new law, the amount of state and local taxes that can be deducted on a federal tax return is increased to $40,000. This is a big win for New Yorkers – All those state and city taxes are bad enough without effectively being double taxed at the federal level.
Increase in Estate Tax Exemption
The big news on the estate tax front is that the heightened estate tax exemption will not expire at the end of the year. Instead, the exemption will increase to approximately $15 million per person in 2026, continuing to increase with inflation thereafter.
Other notable provisions . . .
- Tax Rates and Brackets: The individual income tax rates and brackets from the TCJA (10%, 12%, 22%, 24%, 32%, 35%, and 37%), which were set to expire at the end of 2025 are now permanent.
- Standard Deduction: The increased standard deduction from the TCJA has been made permanent.
- Limits to Deductions for Charitable Giving. Beginning in 2026, taxpayers that itemize deductions on their tax returns may only deduct their charitable contributions that exceed 0.5% of their adjusted gross income. Those that don’t itemize deductions may deduct up to $1,000 individually in cash contributions. This means that you may wish to “bunch” your contributions: Instead of giving $1,000 each year, you may want to give $5,000 every five years.
- New Deductions for Seniors: For tax years 2025 through 2028, taxpayers 65 years and older may claim a special deduction of $6,000 for single filers and $12,000 for married couples. This deduction is subject to income limits and is completely phased out at $175,000. This new deduction is in addition to the existing “additional standard deduction” allowed for seniors under current law.
- Qualified Business Income (QBI) Deduction: The 20% deduction for pass-through business income is now permanent.
- Qualified Small Business Stock (QSBS) Gains. Increases the tax benefits of QSBS-eligible shares. It raises the cap on eligible gains from $10 million to $15 million and reduces the holding period required for QSBS eligibility using a tiered schedule over 3–5 years. The new rules apply to QSBS-eligible shares acquired after July 4 2025.
Use of 529 Plan Funds for K-12 Education. Increases from $10,000 to $20,000 the amount of 529 plan assets that can be used to fund K-12 educational expenses (subject to limitations or restrictions at the state level). The definition of qualified higher education expenses is also expanded to foster broader educational/employment paths. Note that the use of use of 529 account funds for K-12 education expenses is not a qualified use under NY tax law, so withdrawals would still be subject to state and local tax, and any deduction that you took for the contribution for NY income taxes would be subject to recaptured.
Next Step
If you’re unsure how the New York estate tax changes in 2026 or the OBBBA’s broader provisions might affect your family, The Village Law Firm can help. Our team specializes in translating complex laws into clear, actionable strategies that protect what matters most.
Schedule a legal planning session today to review your estate and ensure your plan is ready for the 2026 landscape.
