ALBANY — Gov. Kathy Hochul is already laying out parts of her agenda for the new year, and one of her first announced priorities of the year is a push to exempt up to $25,000 in tipped wages from state income tax.

It’s a move she says stays in line with her “Affordability Agenda,” the slate of moves Hochul has made over the last year to try to make life more affordable in New York. Affordability was a key word in New York politics in 2025, and the governor is renewing that focus.

“As we welcome in the New Year, affordability remains my top priority and I am doubling down on my commitment to put money back in New Yorkers’ pockets,” Hochul said. “Starting today, 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. I’m kicking the new year off with a proposal of no state income tax on tips, continuing my efforts to make New York more affordable for hardworking New Yorkers.”

Under her proposal, which will require approval from the state legislature and is likely to be negotiated in the state budget plan, starting in the 2026 tax year tipped workers would be able to seek an exemption for up to $25,000 in tips paid to them at their workplace. Earlier this year, federal lawmakers and President Donald J. Trump negotiated a similar tax exemption scheme for tipped workers for the federal income tax. Tipped income up to $25,000 is not taxable if the individual makes under $150,000 a year and works in an eligible field.

The federal tax cut comes in the form of a refund; the typical tax rate will still apply to each paycheck and the money is then returned when the taxpayer files their annual tax return.

Eligible jobs include beverage and food service workers, casino floor staff, street performers, laborers like plumbers or carpenters, tutors and child care providers, tour guides and private music instructors, and delivery workers. More than 70 job titles across eight categories are eligible for the federal tax exemption.

The announcement dovetailed with the first effective day for a number of other affordability-focused moves that Hochul and state lawmakers have laid out over the last year.

Jan. 1 marked the start of a new tax year, and Hochul drew attention to an agreement she struck with lawmakers last year to cut the state income tax rate for middle-income earners that is now in effect. Nearly 77% of New York taxpayers will see some sort of reduction in the amount of money they owe the state this tax year, totaling nearly $1 billion in total tax cuts.

At the same time, the state child tax credit is going up, doubling or tripling the previous credit amount in many cases. The increase is being phased in over two years, with families with children younger than 4 years old accessing up to $1,000 in tax credits this year and those with children up to age 16 getting $500 annually starting next tax year. And on Thursday, the official state minimum wage went up. Upstate companies must now pay at least $16 per hour to their staff, and downstate employers must now pay at least $17 per hour.

This was the last year for a standard increase to the minimum wage. Starting next year, the minimum wage will increase based on a rolling three-year average of the Consumer Price Index for Urban Wage Earned and Clerical Workers for the Northeast. Tipped workers can still be paid less than the minimum wage by their employers, provided the tips bring their hourly pay up to the minimum wage. Right now, upstate tipped workers can be paid $10.30 in cash provided they get at least $5.15 per hour in tips.