Living in New York City means paying three layers of tax on top of your federal and state obligations: a city personal income tax that runs from 3.078% to 3.876%, a combined sales tax of 8.875% on most purchases, and property tax calculated under a four-class system with rates that vary widely by property type. Business owners, freelancers, and hotel guests pick up additional levies. Taxes in NYC add up quickly, and knowing what each piece covers helps you avoid surprises at filing time or when a bill arrives.
City Personal Income Tax
New York City charges its own income tax on every resident individual, estate, and trust. It applies only to residents of the five boroughs, not to commuters coming in from New Jersey, Long Island, or Westchester.1NYC Administrative Code documentation. Subchapter 1 – General – Section 11-1701 Nonresidents who earn wages in the city owe New York State income tax on that income but do not owe the city tax.
Who Counts as a Resident
You are a city resident if your domicile is in one of the five boroughs, or if you maintain a permanent place of abode in the city and spend 184 days or more there during the tax year. Once your domicile is set in NYC, it does not change until you can show with clear and convincing evidence that you abandoned it and set up a new one somewhere else. Simply spending time elsewhere without an intention to stay permanently is not enough.2Tax.NY.gov. Frequently Asked Questions About Filing Requirements, Residency, and Telecommuting
Rates and Brackets
The city income tax is progressive. For 2026, the four brackets are:
- 3.078% on the first $12,000 (single) / $21,600 (married filing jointly) / $14,400 (head of household)
- 3.762% on income up to $25,000 / $45,000 / $30,000
- 3.819% on income up to $50,000 / $90,000 / $60,000
- 3.876% on all income above those thresholds
The spread between the lowest and highest rate is less than one percentage point, so the city tax is comparatively flat. Layered on top of state tax (which reaches 10.9% at the top) and federal tax, the combined burden for high-earning New Yorkers is among the steepest in the country.
How You File It
You do not file a separate city return. The New York State Department of Taxation and Finance collects the city income tax as part of your state return (Form IT-201 for residents). A dedicated section of that form calculates your city taxable income and the corresponding tax. The revenue flows back to the city government.
Sales and Use Tax
Almost every retail purchase in the five boroughs carries a combined sales tax of 8.875%. The total is made up of a 4% New York State tax, a 4.5% city tax, and a 0.375% surcharge funding the Metropolitan Commuter Transportation District.3NYC.gov. Business NYS Sales Tax
What’s Exempt
Groceries, prescription drugs, and most unprepared food are exempt statewide. In the city, clothing and footwear priced under $110 per item are also exempt from both the city and state sales tax.4NYC311. Sales Tax Once an item hits $110 or more, the full 8.875% applies. The threshold is per item, so buying two $90 shirts in one transaction keeps both exempt.
The Personal Services Quirk
Haircuts, massages, gym memberships, manicures, tanning, and tattoos are taxable in New York City at the 4.5% city rate, even though most of those services are exempt elsewhere in the state.5New York State Department of Taxation and Finance. Miscellaneous Personal Services and Related Sales in New York City The state and MCTD portions do not apply, so the rate is below the full 8.875%, but it adds up over a year of regular salon or gym visits.
Use Tax
Use tax is the sales tax’s backstop. If you buy a taxable item outside the city and pay no tax or a lower rate, you owe the difference when you bring it in for use here. The most common trigger used to be online purchases from out-of-state retailers, though New York’s marketplace collection laws have narrowed that gap. You report use tax on your state income tax return.
Property Tax
Property tax is the city’s single largest revenue source. Every parcel is sorted into one of four classes, each assessed and taxed differently.6New York State Senate. New York Laws RPT – Real Property Tax Article 18 1802 – Classification of Real Property in a Special Assessing Unit
- Class 1: one-to-three-unit residential homes, including most single-family houses and small attached homes.
- Class 2: residential property with four or more units, including co-ops, condos, and rental apartment buildings.
- Class 3: utility company equipment and special franchise property.
- Class 4: everything else, including office buildings, retail, factories, hotels, and vacant commercial land.
How Assessed Value Works
Your bill is not calculated on the full market value of your home. The Department of Finance first estimates the market value, then multiplies it by an assessment ratio to produce the assessed value. For Class 1 the ratio is 6%; for Classes 2, 3, and 4 it is 45%.7NYC.gov. Class 1 Property Tax Guide A Class 1 home with a $1 million market value has an assessed value of $60,000, and the tax rate is applied to that figure.
Class 1 properties also benefit from assessment caps. The assessed value cannot increase by more than 6% in any single year or 20% over five years, regardless of how fast the market moves. Renovations and additions can push assessed value past those caps, but normal market appreciation cannot. This is why some longtime homeowners in rapidly appreciating neighborhoods pay surprisingly modest property taxes.
Current Rates
The City Council sets the rate for each class every year. For tax year 2026, the rates per $100 of assessed value are:8NYC.gov. Property Tax Rates
- Class 1: 19.843%
- Class 2: 12.439%
- Class 3: 11.108%
- Class 4: 10.848%
Class 1’s rate looks the highest, but the 6% assessment ratio means it applies to a much smaller base. A Class 4 commercial building assessed at 45% of market value often pays far more in real dollars despite the lower rate.
When Property Tax Is Due
The city’s fiscal year runs July 1 through June 30. Whether you pay quarterly or semi-annually depends on your property’s assessed value:9NYC.gov. Property Tax Due Dates
- Assessed value of $250,000 or less: quarterly payments due July 1, October 1, January 1, and April 1, with a grace period through the 15th of each month.
- Assessed value above $250,000: semi-annual payments due July 1 and January 1.
Semi-annual payers who pay the entire year’s tax by July 1 get a 0.50% discount. Pay after the grace period and interest runs from the original due date, not the day you actually pay.
Property Tax Relief and Appeals
STAR
The School Tax Relief program reduces property taxes for owner-occupied primary residences. Basic STAR has no age requirement and is available to homeowners with combined income of $500,000 or less (for the STAR credit) or $250,000 or less (for the STAR exemption). Enhanced STAR requires at least one owner to be 65 or older by December 31 of the benefit year, with combined income of $110,750 or less.10Tax.NY.gov. STAR Eligibility In New York City, approximate annual savings run about $293 for Basic STAR and $650 for Enhanced STAR.11NYC311. School Tax Relief for Homeowners (STAR)
Senior Citizen Homeowners’ Exemption
Homeowners 65 and older with combined household income of $58,399 or less can apply for the Senior Citizen Homeowners’ Exemption, which reduces the property’s assessed value by 5% to 50% depending on income.12NYC311. Senior Citizen Homeowners’ Exemption (SCHE) It can be combined with STAR.
Appealing Your Assessment
If you believe the Department of Finance overvalued your property, you can challenge the assessment with the NYC Tax Commission. The deadlines are strict and cannot be extended:13NYC Tax Commission. Challenging Notice of Property Valuation
- March 1 for Class 2, 3, and 4 properties.
- March 15 for Class 1 properties.
If you receive a revised notice after February 1 that increases your assessed value, you get 20 calendar days from the date of that revised notice to file. The Tax Commission can lower the market value, the assessment ratio, or both. Because of the Class 1 assessment caps, appeals tend to be most impactful for Class 2 and Class 4 owners.
If You Run a Business or Freelance
Unincorporated Business Tax
Freelancers, sole proprietors, and partnerships operating in the city face the Unincorporated Business Tax, a flat 4% on net income earned in NYC.14NYC.gov. Business Unincorporated Business Tax UBT UBT sits on top of your personal income tax, state income tax, and self-employment tax, which pushes the total marginal rate for self-employed New Yorkers well above a W-2 employee earning the same amount.
Business Corporation Tax
Corporations doing business in the city pay the Business Corporation Tax, calculated as the highest of three bases: a tax on business income, a tax on business capital, or a fixed dollar minimum based on NYC receipts. For most corporations the income-based rate is 8.85%. Small businesses and qualified manufacturers may qualify for lower rates starting at 4.425%. Financial corporations pay 9%.15NYC.gov. Business Corporation Tax
Commercial Rent Tax
Tenants leasing commercial space in Manhattan south of 96th Street owe the Commercial Rent Tax if their annualized rent is $250,000 or more. The nominal rate is 6% of base rent, but all taxpayers receive an automatic 35% rent reduction, bringing the effective rate to about 3.9%.16NYC.gov. Business Commercial Rent Tax – CRT It applies only to tenants, and only in that specific geographic zone. Businesses in the other boroughs, or above 96th Street in Manhattan, are not subject to it.
Hotel and Cigarette Taxes
Short-term hotel stays in the city carry a per-night occupancy tax of $2.00 per room plus a percentage of the room charge.17NYC.gov. Business Hotel Room Occupancy Tax Combined with state and city sales taxes, guests routinely see 15% or more added to the room bill. In a suite, the $2.00 fee applies to each room.
New York City imposes a $1.50-per-pack cigarette tax on top of the state excise tax ($5.35 per pack) and federal tax ($1.01 per pack). All cigarettes sold in the city must carry a joint NYC and NYS tax stamp.18NYC Department of Finance. Cigarette and Other Tobacco Products Tax The combined government taxes alone push the floor price of a pack well above $10 before any retailer markup.
Penalties for Paying or Filing Late
Late Property Tax
The Department of Finance charges interest on overdue property tax from the original due date, compounded daily. The annual rate depends on the property’s assessed value. For the period running July 1, 2025 through June 30, 2026:19NYC.gov. Property Tax Late Payments
- 6% for assessed values of $250,000 or less
- 9% for assessed values above $250,000 up to $450,000
- 16% for assessed values above $450,000
The top rate of 16% is punishing, and because it compounds daily, a few months of missed payments on a large commercial property can generate thousands in interest alone.
Late Income Tax Filing and Payment
Because the city income tax rides on your state return, the penalty structure mirrors New York State’s rules:20Tax.NY.gov. Interest and Penalties
- Late filing: 5% of the tax due for each month (or partial month) the return is late, up to 25%. If the return is more than 60 days late, the minimum penalty is $100 or the total amount due, whichever is less.
- Late payment: 0.5% of the unpaid balance per month, up to 25%. This penalty can be waived if you show reasonable cause.
- Underpayment of estimated tax: a rate equal to the federal short-term rate plus 5.5 percentage points, adjusted quarterly, with a floor of 7.5%.
Interest on unpaid tax runs on top of these penalties, compounded daily. Filing on time even when you cannot pay in full cuts your exposure substantially, because the late-filing penalty is ten times the late-payment penalty per month.