How does New York state income tax and unemployment insurance work in 2026?
New York taxes wages on nine brackets, from 3.90% to 10.90%. On top sit a $17,600 unemployment base, a New York City resident tax, and Paid Family Leave and disability deductions.
· New York, United States guide
Illustration · New York City, New York
New York is not a no-tax state, and out-of-state employers feel it on the first payroll. There is a state income tax, with nine brackets running from 3.90% to 10.90%, so you withhold state tax on every employee using Form IT-2104. If they live in New York City, you withhold a separate city tax on top.
The harder part is the number of separate programmes you fund. Unemployment runs on a $17,600 wage base at a combined new-employer rate of 3.48%. On top of that, Paid Family Leave takes 0.43% from each employee and statutory disability adds its own deduction. And the minimum wage is $17 an hour downstate.
Does New York have a state income tax in 2026?
Yes. New York taxes wages on nine graduated brackets in 2026: 3.90% up to $8,500 for a single filer, rising through 5.90% and 6.85% to a top rate of 10.90% above $25,000,000.
You withhold state income tax on every New York employee. There is a state withholding form, Form IT-2104, that sits alongside the federal W-4, and supplemental pay is withheld at a flat 11.70%.
The single-filer bands for 2026 start at 3.90% on the first $8,500, then 4.40% to $11,700, 5.15% to $13,900, 5.40% to $80,650, and 5.90% to $215,400. The bottom five rates dropped slightly for 2026 under a phased middle-class cut, with a further reduction due in 2027. Above $215,400 the rate is 6.85%, stepping up through 9.65% and 10.30% to the 10.90% top rate over $25,000,000. The single standard deduction is $8,000.
Withholding follows the employee's IT-2104, and you remit it to the New York State Department of Taxation and Finance. The trap for first-time New York employers is treating withholding as the whole job. It is the simplest part. The cost and the deadline risk sit in unemployment insurance, Paid Family Leave, and disability, and in the separate New York City tax for city residents.
Do you withhold New York City tax as well as state tax?
Yes, if the employee is a New York City resident. The city levies its own resident income tax on top of the state tax, with a top rate of 3.88%, and you withhold it through the same payroll filing as state tax.
City tax follows residence, not workplace. A New York City resident owes it wherever they work; a commuter who lives outside the city does not, even when the job is in Manhattan.
Hire someone in Brooklyn and they have three income-tax layers on one paycheque: federal, New York State to 10.90%, and New York City to 3.88%. You withhold the city tax on the same return as the state tax, using the city tables in the state withholding publication, so there is no separate city payroll account. Yonkers residents owe a similar local income tax on top of the state rate.
Because the test is residence, you keep an accurate home address for every New York hire and update withholding when someone moves into or out of the city. A move across the city line changes take-home pay even when the salary and the desk do not. Getting the residence flag wrong is the most common New York City withholding error, and it surfaces at year end when the employee files. For comparison, see how Connecticut handles a similar commuter-tax question for workers crossing state lines.
What is New York's unemployment insurance wage base and rate for 2026?
New York's UI taxable wage base is $17,600 per employee for 2026, up sharply from $12,800 in 2025. New employers pay a normal contribution rate of 3.40%.
Add the 0.07% Re-employment Service Fund charge and the combined new-employer rate is 3.48%, a maximum of about $611.60 per employee a year.
Hire your first New York employee and you owe UI on the first $17,600 of their wages, up sharply from $12,800 in 2025. Your combined new-employer rate is 3.48% (3.40% normal rate plus 0.07% Re-employment Service Fund). Once you build an experience rating, your normal rate can range from 1.63% to 9.43%.
Source: New York State Department of Labor, UI rate information
The wage base jumped from $12,800 to $17,600 for 2026, and from this year it adjusts every January to 18 percent of the state average annual wage, so it will keep climbing. You pay UI on the first $17,600 of each employee's wages; everything above that in the calendar year is not taxed for UI. New York's base is now among the highest in the region, and the neighbouring New Jersey UI wage base runs lower.
A new employer holds the 3.40% normal rate until it builds its own experience rating, then moves onto a rate set by its claims history, anywhere from 1.63% to 9.43%. The federal layer sits on top: FUTA is 0.6 percent on the first $7,000 of wages after the full state credit, on top of the New York charge.
What other payroll rules apply to New York employees?
You run the full federal stack: Social Security at 6.2% to $184,500, Medicare at 1.45%, and FUTA. New York's minimum wage is $17 an hour in New York City, Long Island, and Westchester, and $16 for the rest of the state.
New York also runs Paid Family Leave and statutory disability. Paid Family Leave deducts 0.43% from employees, capped at $411.91 a year, and pays 67% of wages for up to 12 weeks.
Two New York deductions catch out-of-state employers. First, Paid Family Leave: an employee payroll deduction of 0.43% of gross wages, capped at $411.91 for 2026, that funds 67% wage replacement for up to 12 weeks of family leave. Second, statutory disability (DBL): the employee pays 0.5% of wages, capped at $31.20 a year, for a benefit of up to $170 a week across as much as 26 weeks. The two run on one disability policy but cover different events. For further detail on how PFL interacts with federal FMLA, see the New York Paid Family Leave website.
The minimum wage is regional: $17 an hour in New York City, Nassau, Suffolk, and Westchester, and $16 everywhere else in 2026, so a worker's county sets their floor. From 2027 both tracks rise with regional inflation. New York City layers its own employee protections on top of state law, which is why employers treat a city hire as its own compliance case. See the full picture on New York wage, overtime, and meal break law for the rest of the employer-side obligations.
How Teamed runs New York payroll end to end
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Contractor onboarding, EOR payroll, and entity graduation all live on one platform: a New York contractor who converts to W-2 keeps their record, and that same employee can graduate to your own US entity without switching systems. Because New York layers state tax, city tax, unemployment, Paid Family Leave, and disability on a single hire, the administrative load per head is high, which changes when your own entity pays off. Use the Crossover Calculator to see the month the model flips, and the point you might graduate to your own entity. Also check the Employer Cost Calculator to see exactly what New York payroll costs you. EOR is the right model for New York, until it isn't.
The mistake we see on New York is budgeting for the income-tax rate and stopping there. You also withhold a separate New York City tax for city residents, fund unemployment on a wage base that just jumped, and run Paid Family Leave and disability deductions on top. Several layers, several ways to miss a filing. We run all of them on one register.
New York payroll is heavier than the headline rate suggests.
One city hire: state tax, NYC tax, Paid Family Leave, disability, a rising UI base.
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