What Is NY Withholding Tax? Rates, Brackets, and Exemptions

New York withholding tax is the state income tax your employer takes out of each paycheck and sends to the Department of Taxation and Finance on your behalf. Rates run from 3.90% to 11.70% depending on how much you earn and how you file, and the same system also handles New York City and Yonkers local income tax where it applies. The point is to spread your yearly tax bill across your paychecks so you don’t owe a lump sum at filing time.

Who Has New York Tax Withheld

Any employer with an office or business in New York that pays wages has to withhold state income tax.¹ Two groups of workers are covered:

New York residents, on all wages — even wages earned for work performed entirely outside the state.²
Nonresidents, on wages for services performed inside New York. If a nonresident splits time between New York and another location, the employer withholds on the full amount unless the employee files Form IT-2104.1 or the employer keeps records showing the correct split.³

You are a New York State resident if the state is your domicile, or if you keep a permanent place of abode here for substantially all of the year and spend 184 days or more in the state.⁴

Withholding is not limited to base pay. Bonuses, commissions, vacation pay, and other supplemental compensation are also subject to withholding, and tips and fringe benefits can be too when they meet the state’s valuation thresholds.⁵

Remote Workers and the Convenience of the Employer Rule

New York has a rule that catches a lot of out-of-state remote workers off guard. If you are a nonresident assigned to a New York office but you work from home in another state for your own convenience, New York treats those remote workdays as New York-source income. Only days you work outside the state out of necessity — meaning your employer required you to work elsewhere — are excluded from New York withholding.⁶

A remote worker in New Jersey or Connecticut whose employer sits in New York can owe New York income tax on their full salary even if they almost never set foot in the state. Your home state may give you a credit for taxes paid to New York, but the credit does not always fully erase the double exposure.

How Much Comes Out of Your Paycheck

The amount withheld is driven by Form IT-2104, the Employee’s Withholding Allowance Certificate.⁷ This is a New York form that does a different job than the federal W-4. On it you choose a filing status (single, married, or head of household), claim allowances that generally reflect dependents and expected deductions, and add any extra dollar amount you want held back each pay period.

If you never submit an IT-2104, your employer must withhold at single status with zero allowances — the highest standard rate.⁷ If you file one that misstates your situation to shrink your withholding, the penalty is up to $500.

2026 New York State Tax Brackets

New York’s rate schedule is progressive, so higher slices of income are taxed at higher rates. For 2026, the state withholding brackets for a single filer or head of household are:

$0 – $8,500: 3.90%
$8,500 – $11,700: 4.40%
$11,700 – $13,900: 5.15%
$13,900 – $80,650: 5.40%
$80,650 – $96,800: 5.90%
$96,800 – $107,650: 7.03%
$107,650 – $157,650: 7.53%
$157,650 – $215,400: 6.40%
$215,400 – $265,400: 11.44%
$265,400 – $1,077,550: 7.35%
$1,077,550 – $5,000,000: 10.45%
$5,000,000 – $25,000,000: 11.10%
Over $25,000,000: 11.70%

Married filers have different bracket thresholds but the same bottom and top rates. The complete tables and calculation methods are published each year in the Department of Taxation and Finance’s withholding guide.⁸

Bonuses and Other Supplemental Wages

When an employer pays a bonus, commission, or other supplemental amount separately from regular wages, New York lets them withhold at a flat 11.70% on that payment instead of running it through the bracket tables.⁸ That’s the state portion only. Federal withholding (22% on most supplemental payments under $1 million) and any local tax are figured on top.

New York City and Yonkers Withholding

If you live in New York City or Yonkers, you owe a local income tax on top of the state tax. The Department of Taxation and Finance collects it through the same payroll process, so there are no separate local filings.

New York City Residents

If you live in New York City, your employer must withhold city tax regardless of where the office is. What matters is your residence, not your workplace. NYC rates for 2026 run from 3.078% on the lowest bracket to 3.876% on taxable income above $50,000 for single filers; married filers and heads of household have higher bracket thresholds within the same rate range. Supplemental wages can be withheld at a flat 4.25%.⁵

Yonkers Residents and Nonresidents

Yonkers works two ways:

Yonkers residents pay a surcharge equal to 16.75% of their net state tax. The supplemental rate is about 1.96%.⁹
Yonkers nonresidents who work in the city pay a flat 0.50% earnings tax on their wages. Withholding is not required when annualized pay falls below $4,000.⁹

Who Can Claim an Exemption

A narrow group of employees can skip New York withholding entirely by filing Form IT-2104-E. You must meet all of the conditions in one of two groups:¹⁰

Group A: You are under 18, over 65, or a full-time student under 25; you had no New York income tax liability for 2025; and you expect none for 2026.
Group B: Your spouse is an active-duty service member stationed in New York under military orders, you are in New York solely to be with your spouse, and you are domiciled in another state.

If you have more than one employer, you can still claim the exemption as long as your total expected income doesn’t create a New York tax liability. A 2026 IT-2104-E expires on April 30, 2027, so you have to file a new one each year you still qualify.¹⁰

What Employers Have to Do

After taking tax out of paychecks, employers send the money to the Department of Taxation and Finance on a set schedule and reconcile it every quarter.

Deposit frequency depends on payroll size. Most employers remit monthly or semi-weekly. Employers whose aggregate withholding reached $100,000 or more in the prior year must enroll in PrompTax and pay by electronic funds transfer on a schedule the Department sets, generally tied to payment windows around the 22nd of each month.¹¹

Every employer files Form NYS-45, the Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return, each calendar quarter, even if there was no payroll during the period.¹² New hires and rehires must be reported within 20 calendar days of the hire date; for a new non-U.S. resident hire, the 20-day clock starts when the employee receives a Social Security number.¹³

Penalties for Getting It Wrong

Late-filed returns carry a penalty of 5% of the tax due per month or partial month, capped at 25%. Returns more than 60 days late face a minimum penalty of $100 or the total tax due, whichever is less. A separate late-payment penalty of 0.5% per month applies to unpaid tax, also capped at 25%, and interest compounds daily on top.¹⁴

Every dollar withheld from a paycheck is treated as a special trust fund belonging to the state, and the employer is personally liable for those amounts whether or not they were actually paid over.¹⁵ Under federal law, a person who willfully fails to collect, account for, or pay over withheld taxes faces up to $10,000 in fines, up to five years in prison, or both.¹⁶ That reaches individual owners and payroll officers, not just the business entity.

Employees have exposure too. Filing a false IT-2104 to reduce your withholding can cost $500 and may bring criminal charges.⁷ Nonresidents with New York-source income who fail to file Form IT-203 when their federal adjusted gross income exceeds the standard deduction can owe the full tax plus the same penalties and interest.¹⁷

1
New York State Senate. New York Tax Law 671 – Requirement of Withholding Tax From Wages
2
Cornell Law School. N.Y. Comp. Codes R. and Regs. Tit. 20 171.5 – Determining New York State Personal Income Tax to Be Withheld on Wages Paid to Resident of New York State
3
New York Codes, Rules and Regulations. 20 CRR-NY 171.6 – Determining New York State Personal Income Tax to Be Withheld on Wages Paid to Nonresident of New York State
4
Department of Taxation and Finance. Income Tax Definitions – Section: Resident
5
Cornell Law School. N.Y. Comp. Codes R. and Regs. Tit. 20 291.1 – Determining New York City Personal Income Tax on Residents to Be Withheld
6
Tax.NY.gov. New York Tax Treatment of Nonresidents and Part-Year Residents
7
Tax.NY.gov. Form IT-2104 Employee’s Withholding Allowance Certificate Tax Year 2026
8
Tax.NY.gov. New York State Withholding Tax Tables and Methods Effective January 1, 2026
9
Tax.NY.gov. NYS-50-T-Y Yonkers Withholding Tax Tables and Methods Effective January 1, 2026
10
Tax.NY.gov. Certificate of Exemption From Withholding
11
Department of Taxation and Finance. PrompTax Program
12
Department of Labor. NYS-45 Quarterly Reporting
13
Department of Taxation and Finance. New Hire Reporting
14
Department of Taxation and Finance. Interest and Penalties
15
New York State Senate. New York Tax Law 675 – Employer’s Liability for Withheld Taxes
16
Office of the Law Revision Counsel. 26 U.S. Code 7202 – Willful Failure to Collect or Pay Over Tax
17
Department of Taxation and Finance. Filing Information for New York State Nonresidents