New York State Tax Revenue: Sources and Where It Goes

New York State’s tax revenue comes primarily from personal income tax and sales tax, with corporate franchise taxes, excise taxes, real estate transfer taxes, the estate tax, a metropolitan payroll tax, and gaming revenue rounding out the picture. The Department of Taxation and Finance collects roughly $103.3 billion in state taxes annually, and administers about $45.1 billion more in local taxes on behalf of counties and municipalities.¹ That money funds an enacted state budget of $268.1 billion for fiscal year 2026-27, with the largest shares going to K-12 education, Medicaid, and public higher education.²

Personal Income Tax

Personal income tax is the single largest source of state revenue. It’s governed by Article 22 of the Tax Law and uses a progressive structure with nine brackets for most filing statuses.³ For tax year 2026, a single filer pays 3.9% on the first $8,500 of taxable income, with rates climbing through intermediate brackets to 10.9% on income above $25 million. Joint filers follow a similar progression with wider brackets; the 5.40% band, for instance, reaches $161,550 for joint filers compared with $80,650 for single filers.⁴

Residents owe tax on all their income no matter where it was earned. Nonresidents and part-year residents pay only on income sourced to New York, which includes wages for work performed in the state and income from property located here.³ Most of this revenue arrives through employer withholding, with employers deducting state tax from wages, bonuses, and commissions and remitting to the Department of Taxation and Finance.⁵ Freelancers, landlords, and investors cover their share through quarterly estimated payments.

Sales and Use Tax

Sales and use tax is the second-largest revenue source. The state rate is 4%, and counties, cities, and school districts layer on their own local taxes. An additional 0.375% applies within the Metropolitan Commuter Transportation District, so the combined rate a shopper actually pays varies by location.⁶

The tax applies to most retail purchases of tangible personal property and to a defined list of services: telecommunications, information services, parking, protective and detective services, interior decorating, and repair or maintenance of personal and real property, among others.⁷ Clothing and footwear priced under $110 per item are exempt from the state’s 4% portion, though some localities still charge their local share.⁸

Use tax backs up the sales tax. If you buy something from an out-of-state seller who didn’t collect New York tax, you owe use tax at the combined rate that would have applied at your delivery location.⁶ For remote businesses, New York captures e-commerce revenue through an economic nexus rule: an out-of-state seller must register and collect once it exceeds both $500,000 in gross receipts from deliveries into the state and 100 separate transactions over the preceding four sales tax quarters. Both thresholds must be met.⁹

Corporation Franchise Tax

Businesses organized as corporations pay the franchise tax under Article 9-A. It applies to any domestic corporation incorporated in New York and to any foreign corporation that does business, maintains an office, owns or leases property, or earns receipts in the state.¹⁰ Even a foreign corporation acting as a general partner in a partnership doing business in New York can fall within its reach. The tax is calculated on business income allocated to New York. Insurance companies and financial institutions follow separate frameworks tailored to their operations. Together, these corporate-level taxes contribute a meaningful but smaller share of total revenue than the personal income tax or sales tax.

Excise Taxes

New York imposes excise taxes on several categories of goods:

Cigarettes are taxed at $5.35 per pack of 20 at the state level. New York City adds $1.50 per pack, making a pack in the city among the most heavily taxed in the country.¹¹¹²
Alcoholic beverage rates vary by category: $0.14 per gallon on beer, $0.30 on wine at 24% alcohol by volume or less, $0.67 on wine and liquor between 2% and 24% ABV, and $1.70 on spirits above 24% ABV.¹³
Motor fuel carries a state excise tax of 8.0 cents per gallon on gasoline, plus a 0.05 cent petroleum testing fee. Additional levies, including the petroleum business tax and applicable sales taxes, push the total state-level burden on fuel considerably higher.¹⁴

Real Estate Transfer Tax

When real property changes hands, the state transfer tax applies at $2 per $500 of the sale price, or 0.4%. Residential sales of $1 million or more also trigger a 1% mansion tax.¹⁵

New York City layers on additional transfer taxes for higher-value properties. Residential conveyances of $3 million or more and commercial conveyances of $2 million or more face an extra base tax, and residential sales above $2 million incur a supplemental tax with rates scaling from 0.25% up to 2.9% depending on the purchase price.¹⁵

Estate Tax

New York is one of a handful of states that imposes its own estate tax. For 2026, the basic exclusion amount is $7,350,000, and estates at or below that value owe nothing to the state.¹⁶

The unusual feature is the cliff. If an estate’s total value exceeds 105% of the exclusion, about $7,717,500 in 2026, the exclusion disappears entirely and the state taxes the full estate from the first dollar. Rates run from 3.06% to 16%. An estate worth $7.35 million pays zero; an estate worth $7.72 million can owe hundreds of thousands. For comparison, the federal estate tax exemption for 2026 is $15 million, more than double New York’s threshold.¹⁷ Estates falling between the two thresholds owe New York tax with no corresponding federal liability.

Metropolitan Commuter Transportation Mobility Tax

The MCTMT is a payroll-based tax on employers and self-employed individuals doing business inside the Metropolitan Commuter Transportation District, which covers New York City and several surrounding suburban counties. Revenue is dedicated to the Metropolitan Transportation Authority for mass transit operations.¹⁸

The tax uses a tiered structure across two geographic zones. In Zone 1, the core New York City area, rates range from 0.055% on the smallest payrolls up to 0.895% for employers with quarterly payroll above $2.5 million. Zone 2 uses the same lower tiers but tops out at 0.635%.¹⁹ Self-employed individuals with net self-employment income above $50,000 from activity within the MCTD also owe the tax.

Gaming and Sports Betting Revenue

Commercial casino gaming and mobile sports betting have become a fast-growing revenue category. New York authorized mobile sports betting in 2022 and quickly built one of the largest markets in the country. In 2025, total state gaming tax revenue from casinos, racinos, and sports betting combined reached approximately $2.6 billion, with mobile sports betting alone accounting for more than half. New downstate casino licenses and continued market growth are expected to push the total higher.

Where the Revenue Goes

K-12 Education

Public education is the largest single expenditure category. The enacted fiscal year 2026-27 budget provides $39.4 billion in school aid to K-12 districts across the state, a $2.1 billion increase over the prior year.²⁰ Foundation Aid, the primary formula-driven funding stream, accounts for $27.8 billion of that total. The formulas weigh each district’s student population, poverty rates, and local property tax capacity to direct resources where they’re needed most.

Medicaid and Health Care

Medicaid is the other dominant budget item. New York’s program covers low-income individuals, seniors, people with disabilities, and children, and total all-funds spending exceeds $100 billion annually, the largest state Medicaid program in the country by a wide margin. Federal matching funds cover a significant share, but the state’s own contribution remains one of the biggest draws on tax revenue.

Higher Education

The 2026-27 budget invests $15.1 billion in the State University of New York and $6.7 billion in the City University of New York, for a combined $22.9 billion in higher education spending.²¹ That funding subsidizes tuition for hundreds of thousands of students and supports research, campus facilities, and opportunity programs across more than 80 campuses statewide.

Infrastructure and Public Safety

Transportation funding covers highways, bridges, and the mass transit systems that move millions of commuters daily. Public safety spending supports the state police, correctional facilities, and emergency services. Together with debt service and other general government operations, these categories absorb the balance of state revenue after education and health care.

1
New York State Division of the Budget. FY 2026 Executive Budget – Taxation and Finance, Department of
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New York State Assembly. Assembly Announces Enacted $268.1 Billion SFY 2026-27 Budget
3
New York State Senate. New York Tax Law – Article 22 – Personal Income Tax
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New York State Senate. New York Tax Law 601 – Imposition of Tax
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New York State Department of Taxation and Finance. Withholding Tax
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New York State Department of Taxation and Finance. Find Sales Tax Rates
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New York State Senate. New York Tax Law 1105 – Imposition of Sales Tax
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New York State Department of Taxation and Finance. Clothing and Footwear Exemption
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New York State Department of Taxation and Finance. Registration Requirement for Businesses With No Physical Presence
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New York State Department of Taxation and Finance. Article 9-A – Franchise Tax on General Business Corporations
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New York State Department of Taxation and Finance. Cigarette and Tobacco Products Tax
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New York City Department of Finance. Cigarette and Other Tobacco Products Tax
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New York State Department of Taxation and Finance. Alcoholic Beverages Tax
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New York State Department of Taxation and Finance. Publication 908
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New York State Department of Taxation and Finance. Real Estate Transfer Tax
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New York State Department of Taxation and Finance. Estate Tax
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Internal Revenue Service. Estate Tax
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New York State Department of Taxation and Finance. Metropolitan Commuter Transportation Mobility Tax
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New York State Department of Taxation and Finance. Metropolitan Commuter Transportation Mobility Tax (MCTMT)
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New York State Assembly. Assembly SFY 2026-27 Proposed Budget Includes $39.4 Billion in School Aid
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New York State Assembly. Enacted Budget Makes $22.9 Billion Investment in Higher Education