What You Need to Know about the New York Property Tax Freeze Credit

The 2015 New York State Budget updated the property tax freeze credit introduced in 2014, offering state residents the opportunity to get back any extra money they spent in property taxes. This tax credit is perhaps less known to residents, and some people in New York are unaware of their entitlement. Find out if you are eligible for the tax credit, and learn more about the relevant rules and regulations that apply.

Which homeowners are eligible for this credit?

Various rules apply to homeowners before they become eligible to receive the tax credit.

First, you must live in a property that is eligible under the STAR program. This means:

  • You must own your home. You may need proof of residency to demonstrate this.
  • You must have a family income of $500,000 per year or less (which includes the owner(s) and their spouse(s) only)

The authorities will consider your income eligibility based on an earlier tax return. The applicable income is your adjusted gross income minus the taxable amount of any deductions from your retirement accounts or individual retirement annuities. If you aren't sure if your taxable income is eligible, you should consult an accountant.

The second eligibility rule applies to where you live. You must live in a taxing jurisdiction that complies with certain efficiency requirements. The authorities will phase in these requirements over two years.

  • In year one, the jurisdiction must only comply with the Property Tax Cap.
  • In year two, the jurisdiction must also develop and implement a government efficiency plan.

Eligibility will vary considerably in different parts of the state. For example, you may live in an area that is subject to town, village and fire district taxes. Only some of these jurisdictions may comply with one or both of the criteria outlined above. In these cases, you will only receive a credit based on increases in the eligible jurisdictions.

When do the authorities review each jurisdiction?

The tax freeze credit system encourages local governments and districts to better manage costs and efficiency. To achieve this, these authorities must stay within a prescribed tax cap and manage efficiency plans to help cut and control costs.

The authorities test compliance with these rules annually. If the authority fails the tests in year one, you may still become eligible for a credit in year two. Likewise, failure in year two does not mean you have to give back any credit claimed in year one. Nonetheless, it's important to understand that you won't receive a property tax credit if your local government does not control spending.

How much can you claim?

The property tax freeze credit generally allows homeowners to claim the full amount of any increase in property taxes. The authorities will allow eligible homeowners to claim the greater of the actual increase in your property tax bill or the previous year's tax bill multiplied by the lesser of 2% or inflation.

You will still receive a tax credit if your property taxes decrease or stay the same. In these cases, you will receive a tax credit equal to the previous year's tax bill multiplied by inflation. In 2015, the average credit was $350. You don't need to report the credit in your tax return.

Certain exceptions apply. For example, if you make home improvements that increase the value of your home, you won't get a credit for any increase in property tax that this creates.

How do you file a claim?

The good news is that you don't need to file a claim for this tax credit. The Tax Department carries out all the necessary calculations and mails checks to eligible homeowners. This process relies on accurate information from the taxing jurisdictions. If this information is late, your payment is likely to arrive late too. You receive a check for each tax year that your property is eligible for a credit.

The New York property tax freeze credit may offer many state homeowners a welcome cash injection, but eligibility rules are strict. Contact the state helpline on 518-453-8146 for more information, or speak to companies like Wiesner & Frackowiak, LC.