Property ownership remains one of the best investment portfolios in the country. Many Americans save for years to buy their own homes, and the highlight of this journey is holding the keys to their home. With homeownership, also comes paying taxes on the ownership of that property. If you’re a property owner in New York, you qualify for a deduction from federal income taxes for tax paid on real estate and personal property such as RVs or boats.
For New Yorkers, who face one of the highest tax burdens in the country, any relief on their tax payments is welcome. A recent study compared the tax burden in the country across three categories; property taxes, individual income taxes, and sales and excise taxes as a share of total personal income in the state. The survey found the average New Yorker’s tax burden was 12.28%, which is the highest in the country.
What is a Tax Deduction?
Your total tax liability depends on your taxable income. A tax deduction lowers your taxable income to lower your tax liability. In tax law, deductions are expenses, which you incur in a year that have a reductive effect on your gross income. These expenses are deducted from your gross income to determine how much tax you should pay.
Deductions fall under different federal and state tax codes. While these deductions are available in the tax law, it’s up to the taxpayer to apply for them in their tax filings.
Property Tax Deduction Explained
As a property owner in New York, you’re eligible for a federal tax deduction on your property taxes.
Property tax levied by New York state, a county, or a town is deductible when you are calculating your federal tax liability. The tax deductions apply only to personal property you own. You can deduct property taxes on your primary home, co-op apartment, vacation homes, and land. Deductions don’t include expenses incurred to renovate, improve, or beautify your home.
Before 2018, you could claim the full tax bill for property tax deductions. This changed when the Tax Cuts and Jobs Act capped property tax deductions starting in the 2018 tax year, which set a limit of $10,000 for joint filing and $5,000 for single filers. You can only claim this deduction if you itemize your deductions on your tax form. A taxpayer should itemize deductions if the sum of all their eligible itemized expenses is greater than the standard deduction allowed in a given tax year.
If you buy a property that carries delinquent tax (unpaid taxes) and pay this liability, this is part of the purchasing cost of the property. You can’t include it in your tax claim as a deduction. If you buy a property where the previous owner had paid taxes on the property for part of the year, those property taxes are not deductible on your taxes for that year.
The tax deduction only applies to tax collected annually by local or state governments.
As stated earlier, you can only take the property tax deduction if you itemize your deductions. This is true for mortgage interest as well. Under the Tax Cuts and Job Act, homeowners who deduct mortgage interest are limited to the amount they pay on $750,000 worth of debt, down from $1 million. Interest on homes bought on or before Dec. 15, 2017, is grandfathered in at the previous rate.
For tax year 2020, the standard deduction for couples filing jointly is $24,800, single filers is $12,400.For tax year 2021, the standard deduction for couples is $25,100, single filers is $12,550. Because the standard deduction doubled in 2018 and is increasing through the 2021 tax year, it is more than likely that fewer homeowners will claim the property tax deduction.
Need Some Help Lowering Your Annual Property Taxes?
If you live on Long Island and are currently paying high rates for property taxes, we understand your struggle. At Heller & Consultants Tax Grievance, we have an extraordinary record in helping you minimize your property tax burden. And, you won’t incur any cost until we successfully lower your property taxes. Give us a call for a free consultation today or apply online here.
Property taxes fund schools, libraries, police and fire departments, along with public works such as roads, parks, and playgrounds. They’re essential to our communities – but that doesn’t make them any easier to pay. When you buy a home, you learn what the property taxes are in your area. However, when those rates start rising, it’s often difficult to understand why. When you’re holding a higher tax bill in your hand, it’s most likely one of the following reasons that are to blame for your property tax bill rise.
1- Property Revaluation
Predictably, municipalities do reevaluate the properties in their area at certain intervals. During this time, accessors, who are government officials, will go around and do their best to determine the true assessed value of the properties in their jurisdiction. This is to help ensure that the tax burden is correctly spread amongst the area’s homeowners. The assessor is only responsible for assessments – not taxes.
According to the NY State Department of Taxation and Finance, months after assessments are finalized by the assessor, taxing units (school districts, cities, towns, and counties) determine the amount of taxes that a taxing unit needs to collect from property owners, known as the tax levy. The property tax levy is determined separately from the assessments and is then distributed over all taxable assessments.
A home assessment doesn’t necessarily mean that your taxes will go up. For example, there may be a lot of new constructions in your community, which can help to offset any tax bill increase.
2- Home Improvement and Additions
Renovations are a common part of homeownership and revitalizing your home can add to its value. Unfortunately, however, that bathroom or more substantial kitchen renovation you just finished will most likely cause your property taxes to rise as well. Why? There’s a simple reason. Improving your home means it’s worth more. As your property taxes are based on the value of your home, when your home value increases, your property taxes will increase alongside.
Adding a second floor to a ranch home or an extension to the back of a colonial house will most likely increase that home’s property taxes. But anything that increases the square footage of the living space that you already have, such as finishing the attic, garage, or basement with sheetrock and adding heat and air conditioning, will likely trigger an automatic reassessment as well.
Building an additional bathroom is an improvement that will trigger a reassessment of a home. While replacing cabinets in your kitchen may not trigger an assessment, moving walls and adding cabinets and countertops may.
Even improvements to your property outside of your home can trigger an assessment. While above ground pools don’t tend to increase property values, inground pools do. Adding fences, sheds, patios, and decks can also increase your home value, causing corresponding property taxes to increase.
Before any home renovation, it might be worth running the numbers. Calculate how much the renovation will cost you, what it will add to your property’s value, and then figure out what the probable rise in your tax bill will be. Before you pull the trigger on your home renovation, decide if you can afford a higher property tax bill, or if the expense of the remodel will leave you with too short a cash flow to pay the higher rates. If you’re unsure, you might want to hold off and save up until you’re sure you have enough for a renovation and your new property taxes.
Home values are partially based on the value of other homes in the area – so keep track of what your neighbors are selling their homes for, not what they pay in taxes since what they pay can include exemptions. If the homes in your neighborhood are selling for more than the asking price, it might be a sign that property taxes are soon to rise. Unfortunately, this type of tax increase is out of your hands.
4 – Building New Schools
New schools are important additions to the community – however, they’re also almost always a signal that a property tax hike is on the way. First off, new schools will attract new families as your community becomes a more desirable location. This will drive home prices up, and subsequently, property taxes.
New schools – at least, if they’re public – may also contribute to higher government budgets, as administrators, teachers, and school employees will need to be hired, and grounds will need to be maintained, which almost always indicates that a tax rise is on the way.
5 – Local Government Budget Increases
One of the principal reserves on which cities and counties draw to fund their budgets is the property tax. If budgetary needs increase, the residents’ taxes may need to be increased to help pay for it.
According to the Office of the NY State Comptroller, with some exceptions, the State’s Property Tax Cap limits the amount local governments, and most school districts can increase property taxes to the lower of two percent or the rate of inflation.In order to override the Tax Cap, local government boards must pass a local law or resolution by at least a 60 percent vote.
What should I do if I Think my Long Island Property Taxes are Too High?
So how can homeowners push back and lower their property tax rates? For starters, make sure your property records reflect your property accurately. Mistakes do happen. Some assessments list more bedrooms or bathrooms than you have in your home. If you do find mistakes, make sure to contact the tax assessor and have them corrected.
If you believe your property taxes are too high, you can file a tax grievance. A tax grievance professional can give you a good estimation of whether pursuing a tax grievance is a good idea or not, and that’s because they have a great sense of the tendencies in the local boards when evaluating various kinds of petitions. Hiring a respected tax grievance firm costs you nothing unless your property taxes are reduced.
Founded on the simple principle of helping our clients pay the lowest possible property taxes, Heller & Consultants Tax Grievance have saved Suffolk and Nassau residents over $35 MILLION, a figure that continues to increase daily. Last year alone we saved our Nassau clients over $1.5M in property taxes… Suffolk homeowners over $1.4M.
Part 1: Homeowners earning between $250,000 and $500,000 a year will get a check for their STAR rebates this year, rather than receiving the savings directly in their school-tax bills.
Part 2: Any STAR recipient that doesn’t switch to a check will miss out on the two percent increase in their tax savings this fall.
The changes won’t impact eligibility – just whether homeowners receive the rebates in a check or in their school-tax bills, and not everyone will feel the change.
Those who owned their homes before Aug. 1, 2015, and earn less than $250,000 a year, will still get the STAR savings in their tax bills unless they opt for the check.
If property owners want to switch to the STAR credit program, the New York State Department of Taxation and Finance suggests that they register as soon as possible, and no later than two weeks prior to the date when the final assessment roll is published.
A spokesperson for the tax department said the system is working well and that homeowners should feel confident they will get the checks prior to when their school taxes are due.
Last year, the agency said it issued 99.5% of STAR credit checks prior to the school tax bill due date.
The School Tax Relief (STAR) program is a property tax rebate program available to New Yorkers whose household income is $500,000 or less – only primary residences are eligible. Around 2.6 million homeowners in New York receive the STAR tax break, which averages to around $790 per year per household.
The tax break is part of a $3 billion program that started in the mid-1990s, which helps New Yorkers curb the impact of having among the highest school taxes in the nation.
Why the Changes?
Under the previous system, schools give homeowners the STAR savings and then get reimbursed by the state — which showed up as a budget expense for the state. The new system gives the savings directly to the homeowners in a check, so it counts as a “personal income tax credit,” and shows up in the state budget as a reduction in tax revenue – not as state spending.
That change is sizable for the state’s finances. The new system is estimated to lower spending by $238 million in the fiscal year. Plus, capping the growth in the program for those who don’t get a check is another potential money-saver for the state.
Critics have asserted that the STAR program’s alterations have created falsities in the state’s budget by changing how the program functions, from a homeowner’s property tax discount to a state-issued ‘personal income tax credit’ that is issued as a check. According to an article in lohud. the Director of State Studies for the Citizens Budget Commission, David Friedfel asserts “the state is able to artificially make state spending appear lower than it is.”
The state defended the changes, however, saying it will help cut out fraud in the program and streamline payments. The goal of the changes, as explained by Freeman Klopott, spokesman for the state Budget Division, is to transfer people to the credit program, which is more efficiently administered. This will help to prevent abuse of the system. It will also separate the STAR savings from the tax bill, making districts more accountable to taxpayers.
What About Mortgage Escrows?
The changes will impact homeowners who pay their taxes through a mortgage escrow because they will pay more per month to cover the taxes, and then have to wait for reimbursement through the STAR check.
Are Seniors Affected?
Senior citizens who get Enhanced STAR are not impacted by the changes and will still get the savings upfront on their tax bills although those receiving Enhanced STAR will now have to enroll in an income-verification program to get the rebate. Enhanced STAR is available to homeowners age 65 and older with incomes of $86,300 or less. This program benefits 665,000 seniors and averages $1,400 a year.
A proposed change in the Republican plan to redefine the federal tax code is basically impractical to Long Island property owners while enormously affecting their capability to take a property tax deduction. This is what critics and analysts said after a long-awaited proposal was disclosed.
Under the current plan that has the backing of President Donald J Trump, property owners who itemized their returns will no longer be allowed to deduct the amount of money paid in their state income taxes from their federal taxes. They will only be able to deduct the maximum amount of $10,000 in property taxes. According to the latest taxation reviews, this proposal will hurt high-income earners and high taxation states such as New York, especially Nassau and Suffolk Counties.
This proposal has been slightly steered by the GOP. It has not significantly changed from the original draft in regard to local deductions, but there are slight changes. The republican house proposed a plan to cap this at $10,000. According to analysts, the cap will be able to cover property owners in most in the upstate counties, but most experts also said that most of the homeowners would be left out in Suffolk and Nassau counties.
“Any elimination or reduction of these deductions will hurt most Long Islanders and the $10,000 cap is virtually useless to Long Islanders who on average pay more in property taxes and state income taxes than any other region in the country,” said Kevin Law, CEO of the Long Island Association, a pro-business group.
The average amount of Nassau deductions for local and state income taxes is $15.213 with another amounting $12.683 for property tax deductions. This is according to a recent report released by the state comptroller’s office. Suffolk’s deduction is $10,934 and $10,387, consequently. As we have said, this is according to the new Republican plan. Under this plan, the property owner will be unable to deduct income tax payments and will most likely see his/her property tax deductions capped at $10,000. This would basically mean that most Long Islanders would lose deductions of $10,000 or more.
It is important to note that mortgage interest deductions will be maintained but only limited for newly bought homes up to $500,000. The loss of these deductions is estimated to result in an amount of $2 billion dollars annually. According to LIA projections, this will greatly hit Suffolk and Nassau economies. They have confirmed that the rates could drop as much as 10% according to the GOP plan. This is according to State Realtors Association.
“Our initial read of the House tax proposal released today is that it will harm many New York homeowners,” Duncan MacKenzie, head of the realtors’ group, said in a statement. “It will lessen the value of the property tax deduction and it cuts a host of other key housing-related tax incentives.”
The National Home Builders Association that has been offering tremendous support to Republican candidates are opposed to the GOP tax plan in its current plan. Those who back the plan believes and promotes the idea of doubling the standard deductions even though it would be primarily for those living in lower tax states. This includes the South and South West. There is also a very decent provision that aims at eliminating an alternative minimum tax that affects most households that make about $200,000-$1 million dollars per year. This is according to a report released by LIA. They also confirmed that the plan would not offset the loss of deductions.
The effect on property tax and state tax deductions are fundamental reasons why 7 of the 9 Republicans in New York delegation are opposed to the plan.
“I am a ‘No’ to this bill in its current form . . . Adding back in the property tax deduction up to $10,000 is progress, but not enough progress,” Rep. Lee Zeldin (R-Shirley) said.
“They call it a tax-cut plan, excuse me . . . In the state of New York, it’s a tax increase plan,” Gov. Andrew M. Cuomo said, calling the loss of state and local deduction “diabolical.”
Now more than ever, we strongly urge all Nassau and Suffolk homeowners to grieve their property taxes prior to the respective filing deadlines. In Suffolk County this year’s filing deadline is May 21, 2019, Nassau is March 1, 2019.
Nassau County Executive Edward Mangano received a warning Last July that in 2017 the popular tax cut which averaged one hundred and sixty-six dollars would no longer be applied.
Even though he was warned about it, Mangano failed to inform about 44 thousand senior citizens who did get the abatement concerning the end of the tax break program. They were completely taken by surprise when they got their general tax bills last month.
The county’s comptroller, including the lawmakers, says that they weren’t informed about the expiration of the abatement.
After many complaints were filed, the state and county lawmakers struggled to extend the abatement by introducing legislation that was enacted back in ’02 to offset a nineteen point three percent increase in county property tax. Homeowners who are at least sixty five years old and make less than eighty-six thousand dollars per annum would qualify for the tax break, which exclusively applied to county taxes.
In an E-mail copy obtained by Newsday, Roseann Dalleva, who is a Budget Director and Lisa LoCurto, who is the Chief Deputy County Attorney for Mangano, stated that they received notification about the abatement’s expiration on July twenty-first, 2016. The E-mail requested guidance for the preparation of the ’17 budget. The E-mail was confirmed by 2 other county sources and said that it came from the assessment department.
On January 19th, a Freedom of Information request was submitted by Newsday, asking for all the E-mails Dalleva and LoCurto exchanged between May and July regarding the abatement. The E-mails were not provided by the Mangano administration, but they did say last week that a reply will be provided to Newsday in approximately thirty days.
One of Mangano’s spokesmen, who are actually involved in a corruption case, said that the County Executive never received information about the expiration of the abatement. He continued to say that the E-mail date referenced is after the completion of the State Legislature’s session last year and it’s too late to impact the situation in 2016. The most important piece of news for the residents though is that the State is addressing the situation.
On Friday, the Democratic Nassau legislator, Laura Curran who is also running for county executive, said that taxpayers are extremely unhappy about county execs who cannot properly run the county. Seniors needed to be informed about this.
The spokeswoman for Presiding Officer Norma Gonsalves, Cristina Brennan, said that the Republican staff and legislators weren’t informed about the expiration of the abatement as well.
Another runner-up for county executive, Comptroller George Maragos, said on Friday that this was all done in secret without notifying the seniors in any way. He continued to say that the whole thing is even more disturbing since the county exec was also not notified about it.
Assemb. Charles Lavine, who plans on running for county exec, said he is truly disappointed of the whole situation and said that the Mangano administration should have at least been forthcoming about this and inform its citizens about the change.
Mangano keeps mum about whether he’ll run again this year
On January the 23rd at the most recent Mangano administration meeting, Curran questioned it when lawmakers voted to request that the state puts an extension on the tax break. Even so, she received no answers.
Was the administration aware at any point during the budgeting process that the abatement will expire? Curran asked.
Former Legis. Fran Becker and Mangano liaison said that the county exec agrees with the abatement’s extension, yet no one was sent yet to talk about this.
This caused Curran to ask whether anyone in the administration knew about this during the budget process. Becker swiftly replied that no one knew about it.
Curran continued to say that since people will vote on this, it’s necessary that we have a good answer. Becker’s reply was to ask Curran to repeat the question.
Yes – Being that an in-ground pool is a permanent concrete fixture to your home, this type of swimming pool can increase the value of your home and subsequently also your property taxes as well. The type of swimming pool that you have, as well as its present condition, does influence the impact it has on the overall value of your property.
In-Ground Swimming Pool
Your in-ground pool increases the value of your home. For instance, according to data from the National Association of Realtors, in-ground swimming pools raised the average value of American homes by up to 8 percent in 2016. The demand for and popularity of swimming pools depends a lot on the different geographic climate conditions across the country, as well as the prevailing trends in the real estate market.
Above-Ground Swimming Pool
Data from the same site also reveals that, unlike in-ground pools, your above-ground pool doesn’t have any impact on the property value of your home. This is because an above-ground pool can be easily removed, replaced, and re-installed. In addition, installing an above-ground swimming pool costs far less than installing an in-ground one.
In order for an in-ground swimming pool to add to the property value of your home, you need to maintain it very clean, well-kept, and in usable condition all the time. Also, it must have met all the required safety standards before a bank or mortgage lender can issue a loan for your property. Otherwise, it could greatly affect your property value negatively.
Your home’s appraised value can be used to assess real estate taxes on your property. Depending on its state of maintenance, calculating your annual real estate taxes involves your home’s value being multiplied by a certain percentage figure. If your in-ground pool has had any influence on your home’s overall value, that increase is going to be reflected in your property taxes accordingly.
If you think you are overpaying your property tax, be sure to contact The Heller & ConsultantsTax Grievance Group and request a FREE analysis today! Or click here to simply fill out a Tax Grievance Application. You have NOTHING to lose….except your taxes!