At its May 13th meeting, the New York City Banking Commission proposed property tax interest and early-payment discount rates for Fiscal Year 2026. These recommendations now await the City Council’s decision, expected by the end of June 2025, before the new fiscal year begins on July 1.
Early Payment Discount Remains Attractive
The Commission recommended keeping the early-payment discount at 0.50% per annum. Paying the full annual property tax bill upfront by July continues to offer property owners a modest but valuable incentive. The city estimates savings of $7.40 per invoice on billing costs alone when taxes are paid early—a significant benefit considering approximately 111,000 property owners opted for early payment last year.
Interest Rates Adjusted in Response to Federal Changes
For taxpayers utilizing installment payment plans under Local Law 36 of 2023, the recommended interest rate for FY2026 is 5%, a decrease from last year’s 6%. This adjustment aligns closely with the decline in the Applicable Federal Rate (AFR), which dropped from 4.97% last year to 4.05% this May, rounded to 4.5% as stipulated by local regulations. The Commission set this new rate just slightly above the adjusted AFR.
Statutory Requirements Shape Late Interest Rates
Late payment interest rates depend on property assessed values and are calculated using statutory formulas tied to the prime rate, which currently stands at 7.50% (down from 8.50% last year):
- Properties assessed at $250,000 or less: 8% interest (prime minimum)
- Properties assessed between $250,001 and $450,000: 15% (prime +4%)
- Properties assessed above $450,000: 18% (prime +6%)
These minimum statutory requirements ensure that late-interest rates reflect prevailing market conditions. However, the Banking Commission chose not to reduce rates further, concerned that deeper cuts could diminish incentives for timely payments and negatively affect city cash flow and collections.
City Council to Finalize Rates in June
Historically, the City Council has modified Banking Commission recommendations before enacting final rates. Last year, the Council chose significantly lower interest rates (6%, 9%, and 16%) than those recommended by the Commission.
This year’s recommendations represent a balanced approach, closely aligned with federal benchmarks and legal mandates, while allowing flexibility for City Council adjustments. Property owners, financial institutions, and tax professionals should monitor upcoming City Council hearings in June, where final decisions affecting every NYC taxpayer will be made.