New York has created a property tax credit for homeowners who earn under $250,000 a year and pay over 6% of their income in property taxes. The credit amount will be between $250 and $350 (the maximum) with New York estimating that about 4.5 million owner-occupied homes will qualify for the new credit. All in this is expected to result in about $383 million in property tax savings each year for New York State taxpayers.
Who Qualifies
Generally speaking, homeowners whose adjusted gross income is below $250,000 annually (with restrictions on losses claimed) and pay more than 6% of their income towards property taxes will qualify for the credit. However, there is a small anomaly that may disqualify those whose expected credit amount is less than $250, which the NYS Governor’s Office explained, ” The calculation of this credit is capped at $350 per STAR-eligible household, while also utilizing a $250 credit minimum to further target homeowners impacted the most by high property taxes.”
Additionally, to qualify, homeowners must live in their residence for at least 183 days out of the calendar year. This means the home must be your primary residence, and also means the credit will only be available for one property. Furthermore, as stated on IRS Form IT-229-I, the credit “Is not allowed to a property owner if that person has more than 20% of the rental income from the property.”
Calculating the Credit
When determining how much of the credit you are entitled to, there are multiple different calculations to make depending upon your income, as follows:
Earning Under $75,000 a Year
If your household earns under $75,000 a year, your credit will be 14% of the amount of “excess” property taxes paid (anything above 6% of the homeowners’ income). For example:
If someone makes $50,000 this year and pays $5,000 in property tax; 6% of the $50,000 is $3,000, which means the homeowner paid $2,000 in “excess” property tax; 14% of $2,000 is $280, which means the homeowner would get credit for $280.
The new credit’s maximum payout is $350, so if the calculation does happen to equate to an amount greater than this, the homeowner would still only receive $350. Additionally, as mentioned earlier, if the credit happens to work out to be under $250 (the credit minimum) homeowners will not be able to collect any amount.
Earning Between $75,000 and $150,000
As homeowners earn more, the credit calculations become slightly more complex as a two-pronged calculation must take place. Also, percentage-wise, you will take home a little less (although the credit amount will still fall between $250 and $350). For example:
If you earn $100,000 take the amount of income in excess of $75,000 [$100,000 – $75,000 = $25,000] and divide it by $75,000 [$25,000/$75,000 = .33]; then take that number and multiply it by .05 [.33 x .05 = .016]; then take that number and subtract it from .14 [.14 – .016 = .1233] ; whatever number you are left with is the percentage of “excess” property tax that will be equal to your credit
Earning Between $150,001 and $250,000
There is a similar calculation for those earning between $150,000 and $250,000, except that it will be based on income n excess of $150,000 (instead of $75,000) and is divided by $100,000 (instead of $75,000). The number is then multiplied by .06 (instead of .05) and subtracted from .9 (instead of .14).
Wrap Up
This is a new credit that should be taken advantage of by anyone who may qualify and will be in effect in tax years 2022 and 2023 according to the budget. The calculations are tricky for this credit and confusion will likely be encountered, if you’d like guidance, give us a call and find out how we can help