Key figures
New York advisory
2026, with sources
Credits that pay cash
New York’s incentives mostly run through Empire State Development rather than the tax return alone. The Excelsior Jobs Program offers five fully refundable credits over a benefit period of up to ten years, including a jobs credit of up to 6.85% of wages per net new job and an R&D credit of 50% of the portion of the federal research credit tied to New York expenditures, up to 6% of New York research spending. Refundable matters to a startup: a company with losses gets cash rather than a carryforward. Admission is not automatic; a company applies, commits to job and investment thresholds, and must meet them to earn the credits.
Separately, the Article 9-A schedule gives qualified emerging technology companies (QETCs) a 4.875% business income rate, a 0% capital base rate and a lower fixed dollar minimum ($19 to $3,750). QETC status depends on the company’s technology and its receipts and research spending; the CT-3 instructions set out the tests.
What changed in 2026
The fiscal 2027 budget, enacted in May 2026, extended the 7.25% rate on business income bases over $5 million and the 0.1875% capital base rate through 2029, and decoupled the state and the city from federal immediate expensing of R&E. It did not decouple from the federal QSBS exclusion, despite a Senate proposal to add back 100% of excluded gain, and it left the pass-through entity tax credit unchanged.
The 7.25% rate is a cliff: once the business income base passes $5 million, the whole base is taxed at 7.25%, not just the excess. A company crossing that line in a growth year sees its New York effective rate jump, and the forecast should model it.
Where founders go wrong in New York
Consider a seed-stage company incorporated in Delaware with two founders in Manhattan and its first engineer starting next month. Before that first payroll it needs an Application for Authority, a withholding and UI account, a disability and PFL policy, new-hire reports, the NYC paid-leave notice, and a decision on whether its SaaS sales to New York customers already require sales tax registration. None of these are exotic, but each has its own agency.
- Registering with the state and forgetting the city: NYC’s Business Corporation Tax is a separate return to a separate agency.
- Missing the MTA layer: the CT-3-M surcharge on income and the MCTMT on payroll both apply in the commuter district.
- Buying workers’ comp but not the disability and Paid Family Leave policy New York requires on top of it.
- Treating SaaS as untaxed: New York taxes prewritten software however it is delivered.
- Hiring an employee upstate and assuming the NYC rules apply (or the reverse): minimum wage, paid leave and the MCTMT all depend on where the work happens.
The federal baseline
This page covers what New York adds. The federal rules underneath it apply here too.
Common questions
Does New York have an R&D credit a seed-stage startup can claim?
Not automatically. The state’s R&D credit for most companies comes through the Excelsior Jobs Program, which Empire State Development admits companies to based on job and investment commitments. Once admitted, the Excelsior R&D credit is 50% of the share of the federal research credit tied to New York expenditures, capped at 6% of New York research spending, and it is fully refundable.
Will New York tax my QSBS gain if the federal exclusion applies?
No, as of the fiscal 2027 budget. The Senate proposed adding back 100% of federally excluded QSBS gain, retroactive to 2025, but the enacted budget did not include it, so New York residents follow the federal § 1202 exclusion. It is a proposal that has come up before and can come up again.
Advisory next door
- CTConnecticut advisoryConnecticut lets small companies exchange unused R&D credits for 65% of their value in cash, and offers angel investors a 25% credit. The surtax and NOL cap catch forecasts.
- MAMassachusetts advisoryMassachusetts offers a research credit with a long carryover, a 4% surtax on income over $1,107,750 that a share sale can trigger, and a strict ABC test for contractors.
- NJNew Jersey advisoryNew Jersey lets startups sell their losses and R&D credits for cash, gives angel investors a 35% refundable credit, and follows federal QSBS from 2026.
- PAPennsylvania advisoryPennsylvania’s R&D credit can be sold, which makes it worth applying for before profit. Pennsylvania doesn’t follow federal QSBS, and its corporate rate keeps falling to 4.99% in 2031.
- VTVermont advisoryVermont’s R&D credit is 27% of the federal credit for Vermont work, carried forward 10 years, and the state publishes who claims it. Three recent rule changes trip up older advice.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- SAFEsHow to account for SAFEs on your balance sheetA SAFE is cash today and shares later. Why it usually sits with liabilities, how the cap and discount set conversion, and what to book at the priced round.
- EquityStock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the New York guide
- AccountingAccounting and state tax in New YorkCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in New YorkSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in New YorkPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in New YorkWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in New YorkRegistering to do business, annual reports, franchise tax and the filing calendar
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- Empire State Development — Excelsior Jobs Program
- NYS Department of Taxation and Finance — Form CT-3-I instructions (2025)
- NYS Department of Taxation and Finance — Definitions and rates for Article 9-A corporations
- BDO — New York passes fiscal 2027 budget
- NYS Department of Taxation and Finance — Form CT-3.4-I, Net Operating Loss Deduction (2025)
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.