Money in Your Pockets: Governor Hochul Proposes Middle-Class Tax Cuts, Inflation Refunds and Child Tax Credits to Make New York More Affordable

Governor Kathy Hochul today proposed a middle class tax cut for more than 8.3 New York taxpayers as part of her 2025 State of the State. By cutting rates across five of the State's nine tax brackets, Governor Hochul will bring tax rates down to their lowest level in nearly 70 years. The Governor is also proposing New York's first-ever Inflation Refund and a sweeping increase in the Child Tax Credit.

"Families shouldn't have to worry about whether or not they can afford to put food on the table because of the rising cost of groceries," Governor Hochul said. "Making New York more affordable has been one of my top priorities and to continue this commitment, I am proposing a substantial tax cut for middle class New Yorkers to lighten the burdens of inflation."

Middle Class Tax Cuts
Governor Hochul is proposing a middle class tax cut to deliver nearly $1 billion in tax relief to more than 8.3 million New Yorkers. This will provide savings to taxpayers earning up to $323,000 for joint filers. When fully phased in, the middle class tax cut will deliver hundreds of dollars in average savings to nearly 77 percent of filers - representing three out of every four taxpayers.

Once passed into law, Governor Hochul's middle class tax cut will take effect in the current tax year and will be reflected in the rates that taxpayers pay out of each paycheck - offering immediate relief, each and every payday, to hard-working New Yorkers.

New York's First-Ever Inflation Refund
As inflation raises prices on everything from eggs to clothing, New Yorkers continue to feel the pinch at the cash register. While inflation has driven prices higher, sapping the income of New Yorkers, it has also driven sharp increases in the State's collection of sales tax. Governor Hochul believes that money belongs to hardworking New York families and should be returned to their pockets as an Inflation Refund, which is why she proposed New York's first-ever inflation refund that will put $3 billion back in the pockets of 8.6 million taxpayers. By the close of 2025, New York State will send direct payments to everyday New Yorkers. Joint tax filers who make $300,000 or less will receive a $500 payment and all single New York taxpayers who make $150,000 or less will receive a $300 payment. These one-time payments will help give New Yorkers' finances more breathing room in 2025.

Sweeping Increase in Child Tax Credit
Governor Hochul is championing families with a transformative proposal to expand New York's child tax credit, providing critical financial support for more than 2.75 million children statewide. This historic plan will double or triple the current credit in many cases, offering up to $1,000 annually per child under four and up to $500 per child aged four to 16. This marks the largest increase in the credit's history, significantly surpassing the current maximum of $330 per child. Governor Hochul has been advancing efforts to reduce child poverty since she took office in 2021 and created the Child Poverty Reduction Advisory Council (CPRAC) with the goal of significantly reducing child poverty. The CPRAC put forward recommendations in December 2024, which included the expansion of a child tax credit as among the most impactful methods by which to reduce poverty.

The expanded credit will benefit families across the income spectrum, with the average credit rising from $472 to $943 annually. It will provide much-needed relief to middle-class families who were previously ineligible, such as a family of four earning $170,000, that will now receive over $500 annually. For families with a toddler and a school-aged child earning up to $110,000, the credit will total $1,500 - nearly $1,000 more than the current program provides.

The expansion will be phased in over two years, starting in 2025 for children under four and extending to older children in 2026. This refundable credit will reduce child poverty statewide by an estimated 8.2 percent and, when combined with initiatives already undertaken by the Hochul Administration such as expanding subsidized child care, is expected to lower child poverty by 17.7 percent. Governor Hochul's proposal represents a bold step toward reducing poverty and supporting families across New York.

New York State Department of Taxation and Finance Acting Commissioner Amanda Hiller said, "Governor Hochul's middle class tax cut, inflation relief checks and expanded child credit will make a real difference in every working family's budget. The Tax Department stands ready to deliver this much-needed relief as quickly as possible."

Governor Hochul's 2025 affordability agenda builds on her relentless work to address the cost-of-living crisis and make New York State a more affordable home for all of our families. From lowering taxes, delivering refund checks directly to New York families and enacting bold policies to driving down the costs of child care, housing and energy, Governor Hochul has fought to lift up New York families. Since taking office, Governor Hochul has:

• Raised the minimum wage to $16.50 in New York City, Long Island and Westchester, and to $15.50 for the rest of the State, with wages poised to increase again in 2026 and to keep up with inflation thereafter.
• Secured nearly $600 million in gas tax relief for everyday New Yorkers when gas prices skyrocketed.
• Brought home $10 billion in federal funding to provide high-quality, affordable health insurance for about 1.5 million New Yorkers through the federal State Innovation Waiver, the nation's largest State Innovation Waiver award to date.
• Banned co-pays for insulin on all New York State regulated health care plans.
• Provided $1.26 billion in affordable mortgages to create 7,300 homeownership opportunities.
• Paid out over $2 billion in bonuses to more than 800,000 health care workers statewide, sending bonuses of up to $3,000 to workers across New York.
• Dispatched $2.3 billion in tax relief to nearly three million New Yorkers under the State's School Tax Relief program.
• Created the Energy Affordability Guarantee pilot program, which will reduce the financial burden for low-income households that take advantage of the New York State Energy Research Development Authority's no-cost efficiency improvements to their home by capping the annual price of their electricity costs.
• Required health insurers to cover EpiPens, capping out-of-pocket costs at $100, making the life-saving treatment more affordable for the New Yorkers who need it.