With tax season upon us, employees in New York state may see some of what New York State Gov. Kathy Hochul calls tax relief and affordability when they file their taxes this year. But employees may have to wait until Tax Day 2027 to reap all of the benefits the governor recently rolled out.

Hochul stated that in 2026, tax rates for the vast majority of lower and middle-class New Yorkers will be cut, families with children will see a “sweeping” increase in the child tax credit, and minimum wage workers across the state will see their wages go up. She also announced her proposal of no state income tax on tips.

No Tax on Tips

On New Year’s Day 2026, Hochul stated that in her upcoming FY2027 Executive Budget proposal, she will put forth legislation that eliminates state income taxes on up to $25,000 of tipped income in tax year 2026, which follows federal guidance, and is a continuation of her “Affordability Agenda.”

The announcement follows the passing of the “One Big Beautiful Bill” by the U.S. Senate and House of Representatives and signed into law by President Donald J. Trump on July 4, 2025, which includes provisions for employees mandating no tax on tips and no tax on overtime provisions.

Effective 2025 through 2028, the federal “no tax on tips” federal rule means that employees and self-employed individuals may deduct “qualified” tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before Dec. 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.

For states adopting the Trump Administration’s no tax on tips rule, the legislation provides tax deductions for tipped servers and bartenders, and hourly employees who earn overtime premium pay. The rule, however, was not adopted or implemented by New York state. Illinois, Maine and Washington D.C. also opted out of “no tax on tips,” in part because they stood to lose significant revenue, according to the Institute on Taxation and Economic Policy, a nonpartisan think tank.

Child Tax Credit

Affecting employees doing their 2026 taxes, in the FY2026 Enacted Budget, Hochul expanded New York state’s child tax credit, providing financial support for more than 2.75 million children statewide, according to her website. The latest expansion “doubled or in many cases, tripled” the current credit, offering up to $1,000 annually per child under 4 and up to $500 per child aged 4 to 16, Hochul has stated, calling the latest expansion the largest increase in the credit’s history, significantly surpassing the previous maximum of $330 per child. While New Yorkers receiving expanded benefits starting in 2026 are for children under 4, benefits will extend to older children in 2027, Hochul’s website states.

It should be noted that, in 2026, New York state residents can file and get this money even if they don’t have income, don’t normally file taxes, or haven’t filed taxes for a while, according to the Empire State Child Credit webpage.

Middle Class Tax Cuts

Hochul also stated that more than 8.3 million New Yorkers will see nearly $1 billion in tax relief in 2026. This, she says, will provide savings to taxpayers earning up to $323,000 for joint filers, and when fully phased in, the middle-class tax cut will deliver hundreds of dollars in average savings to nearly 77% of filers — representing three out of every four taxpayers.

Minimum Wage

Beginning Jan. 1, 2026, New York State’s minimum wage increased to $17 per hour in New York City, Westchester, and Long Island, and $16 per hour in the rest of the state. Starting in 2027, the minimum wage will increase annually at a rate determined by the Consumer Price Index for Urban Wage Earned and Clerical Workers for the Northeast Region.

What To Do If Employer Doesn’t Comply With Tax Rules

If your employer does not comply with tax rules, such as failure to, or incorrectly withholds taxes from your paycheck, you may want to consider taking the following steps:

• Contact your payroll or HR department immediately to correct any errors and discuss the situation.
• File your tax return accurately, including any adjustments for the taxes not withheld.
• Make estimated tax payments throughout the year if you are responsible for your own taxes.
• Consider legal recourse if necessary, such as reporting the employer’s failure to withhold to the IRS or considering a private legal claim.

It is important to stay informed about your employment tax obligations and take action to ensure compliance for yourself and your employer. If you encounter any issues, seek professional and legal assistance to navigate the complexities related to tax compliance.

A knowledgeable employment attorney can help you gain an understanding of the unique difficulties each workplace conflict presents and work toward a solution that benefits you. Tully Rinckey attorneys have the experience to assist both employees and employers in achieving their objectives, regardless of the matter, which may include discrimination, sex harassment, or any other claim involving worker rights or employer responsibilities, including accurate tax reporting. Call 8885294543 or contact us online today for a consultation and get an advocate who will fight for your rights and help secure your career and your future.

Michael Ognenovski, Senior Counsel at Tully Rinckey PLLC’s Rochester office, focuses his practice on labor & employment law and litigation.