At the end of an unusual extended session last year, the New York State Legislature enacted a provision that would provide certain homeowners with a real property tax credit. Signed into law by Governor Andrew Cuomo as Chapter 20 of the Laws of 2015, Part C of this act contains the provisions that govern the administration of this credit. This credit is effective for taxable years 2016 through 2019; an advance payment of the credit will be issued by October 31 of each year that the credit is in effect [Tax Law section 606(n-1)].
To be eligible for the credit, a taxpayer (or taxpayers filing joint returns) must have on their New York personal income tax returns filed for the second taxable year prior to the year of the real property tax exemption (e.g., for 2016, look to the 2014 tax return). A taxpayer must have filed as a resident of a qualifying school district (other than New York City); must have used as the primary residence real property receiving the New York State School Tax Relief (STAR) exemption (either basic or enhanced); and had “qualified gross income” that did not exceed $275,000 [Tax Law section 606 (n-1)(1)(a)].
A qualifying school district is defined as an independent school district that has adopted a budget in accordance with the limits set forth in the Education Law section 2023-a and has certified that it has complied with such limits; or a city with a dependent school district (other than New York City) that has adopted a budget in accordance with the limits set forth in the General Municipal Law section 3-c and has certified that it has complied with such limits [Tax Law section 606 (n-1)(1)(a)(i)–(iii)].
Determining the Credit
For taxable year 2016, taxpayers with qualified gross income of $275,000 or less owning and residing in real property within the Metropolitan Commuter Transportation District (MCTD) but outside of New York City will be eligible for a credit of $130. Taxpayers with qualified gross income of $275,000 or less owning and residing in real property outside the MCTD will be eligible for a credit of $185 [Tax Law section 606 (n-1)(1)(3)(a)].
For taxable years 2017 through 2019, the credit will be equal to the STAR tax savings multiplied by a percentage based on the taxpayer’s qualified gross income. The full tables for taxpayers receiving the basic STAR exemption can be found in Tax Law section 606 (n-1)(3)(b); in general, the applicable percentage declines with the taxpayer’s income but increases from taxable year 2017 to 2019 (e.g., from 28% to 60% to 85% for gross income $75,000 and under). For taxpayers receiving the enhanced STAR exemption, the applicable percentage rises from 12% in 2017 to 26% in 2018 to 34% in 2019.
The amount of the credit received may not exceed the amount of the school district tax for that school year. If the calculated amount of the credit exceeds the school district tax for that school year, the excess will be treated as a refundable credit on the taxpayer’s personal income tax return for that year [Tax Law section 606 (n-1)(3)(c), (5)].
For the purpose of the above calculations, qualified gross income is defined as federal adjusted gross income (AGI). But any losses from Schedules C, D, E, or F included in AGI are limited to a maximum of $3,000 per schedule [Tax Law section 606 (n-1)(4)(a)].
Taxpayers whose real property taxes remain unpaid 60 days after the last date on which they could have been paid without interest (or, if the taxes are payable in installments, remain unpaid 60 days after the last date on which the final installment could have been made without interest) are not eligible for the credit. If the real property taxes remain unpaid after the 60th day, any credit received or credit claimed by the taxpayer must be added back in computing New York AGI in the year that the 60th day occurs [Tax Law section 606 (n-1)(6)].
In addition to the real property tax credit, the act extends the life of the enhanced real property circuit breaker for four years—from January 1, 2016—and repeals it effective January 1, 2020.
Complexity along with Relief
Overall, this credit does help in alleviating the real property taxes homeowners face. But preparers face increased complexity in obtaining information from taxpayers—who may not remember whether they received the advance payment, or how much they received—and determining if a tax credit is available. In addition, the author wonders about the October 31 deadline of the advance payment—just before Election Day.