With its lively art scene, great restaurants, and stunning skyline views, New York offers a unique living experience. These are just a few reasons so many people dream of owning a home here— but did you know that there are several tax benefits associated with homeownership in The Empire State as well? From property tax deductions to exemptions offered by certain school districts, municipalities and counties, there are plenty of tax perks available to homeowners in New York. Keep reading for tips to help you out this tax season!
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Homeowners Can Deduct Their Mortgage Interest
Homeowners with mortgages not exceeding $750,000 can deduct the interest on their loans, presenting a significant financial advantage. This deduction has been facilitated by the Tax Cuts and Jobs Act (TCJA), which lowered the limit from the previous $1 million. Additionally, homeowners can deduct interest on up to $100,000 of home equity debt, regardless of the purpose for which the borrowed money was used.
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Some New Yorkers Can Take Advantage of the School Tax Relief Credit (STAR)
The STAR Program is a state-specific tax credit that can save some homeowners hundreds of dollars each year. According to the New York State Department of Taxation and Finance, to qualify, your home must serve as your primary residence, and your total household income must not exceed $500,000. Seniors with a household income below $92,000 can benefit from the enhanced STAR credit. It's important to note that new STAR applicants receive a STAR credit instead of the STAR property tax exemption, which might have applied to their previous properties. Despite this change, the eligibility criteria and savings amount remain consistent. To learn more about this tax credit and to check to see if you are eligible, visit the STAR resource center.
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The New York State Property Tax Cap Limits Increase to Certain Taxes
The NY State Property Tax Cap puts the brakes on increases in school and local property tax levies, capping them at two percent per year or the rate of inflation—whichever is less—all while keeping local control intact. Thanks to this cap and the active participation of citizens, New York's property tax levies have seen an impressive average growth rate of about only two percent, according to the NY Dept. of Taxation and Finance.
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The Property Tax Deduction Can Help Homeowners Save Up to $10,000
Another valuable benefit for homeowners is the deduction of property taxes, allowing a deduction of up to $10,000. It's important to note that this deduction doesn't apply to taxes on rental or commercial properties, as well as properties not owned by the taxpayer.
Claiming your property tax deduction can be done through various methods. If you use an escrow account with your lender for tax payments, the amount paid in taxes can be found on your IRS Form 1098, enabling a straightforward deduction during tax time. Alternatively, if you handle tax payments directly to your municipality, ensure you maintain a record of the paid taxes for proper deduction purposes.
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Property Tax Exemptions for Certain NY Municipalities, Counties, or School Districts
New York homeowners can explore the possibility of additional property tax exemptions provided by their local municipalities, counties, or school districts. These exemptions are often accessible to senior citizens, veterans, and individuals with disabilities. To learn more, check out the Property Tax Forms - Exemptions section of the NY State Department of Taxation and Finance website for more details.
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The Mortgage Points Deduction
Homeowners can benefit from a valuable tax advantage known as the Mortgage Points Deduction which allows taxpayers to deduct points paid at closing over the loan period, offering gradual savings. The deduction, equivalent to 1% of your loan, becomes especially beneficial in the long run. To qualify for full deduction, specific tests set by the Internal Revenue Service (IRS) must be met, detailed on their website.
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Home Office Write-Offs
Lastly, if you operate a home-based business, you may be eligible for the Home Office Deduction, which is applicable to both renters and homeowners. This tax relief requires utilizing part of your home for business and demonstrating its significance as a business location. Check the IRS guidelines for eligibility and requirements.
Tax season is right around the corner! We hope these tips help you take advantage of all the deductions available to New York homeowners. When considering financial guidance provided by the Geiger Stern Team, we strongly recommend seeking the expertise of a professional.
Need help? Reach out to us for a referral! We’re connected to some great CPAs and financial advisors in Westchester County.
