How Is the New York State Homeowners Credit Allocated?
Sept. 29, 2015 — Once a building determines it qualifies, the New York State Homeowners Credit is then allocated among the shareholders or unit-owners of the building based on their ownership percentage. For example, if you have 20 shareholders in a co-op and each of them owns five percent of the shares in the corporation, then each of those individual shareholders would get an allocation of five percent of $200,000.
There is more to consider.
"Let's say you did a $100,000 rehabilitation, you will have earned a $20,000 tax credit," notes Murray Gould, principal in Port City Preservation, a company that assists buildings in getting tax credits. "But you might only be paying $5,000 a year in New York State taxes. The credit is a dollar-for-dollar offset against your personal income taxes. If the gross income of the shareholder is $60,000 or less, then any unused credit would be fully refundable. And if it's not, then it's carried forward to the following year."
A Crucial Difference
In applying for the credit, it is crucial to remember that co-ops and condos are fundamentally different from single-family homes. In condos, the association only owns the common areas and the façades; the unit-owners own their apartments outright. Similarly, a co-op shareholder is responsible for any construction or renovations within the apartment.
Why is that important? Simple: one benefit of the law is that unit-owners and shareholders can apply for a personal tax credit on renovation work they do inside their units — but only if it is done at the same time as the exterior work.
Gould says that this was the situation at Dunolly Gardens: "They were undertaking in their six buildings a series of renovations of exterior masonry, primarily masonry and roof work," he recalls. He advised them to alert the residents about their opportunity to get tax credits for work they did.
Consequently, after the board completed the application and received approvals for its plan, the shareholders were informed in a letter that essentially told them, "If you're thinking about doing some interior work, now is the time to do it."
According to Gould, this is how it works: "If you have 60 shareholders in 60 units, and 20 of them decide they're going to do interior work, each would have to then file a separate application for the interior work, and it would be coordinated with the fact that the building did an umbrella application for the whole project."
If you're still unclear about how to apply, Gould, who walked Dunolly Gardens through the process, explains: "When I prepare a packet, what I say to them is, 'Take this packet to your tax preparer.' I lay everything out step by step: the forms, what you do if you file electronically, what you do if you hard file. Again, I go through it step by step by step, because not everybody deals with historic tax credits."
The homeowner and commercial state credits will be available until December 31, 2019.
For additional information on the New York State Homeowners Credit and whether you qualify, check out the Tax Credit Program page on the New York State Office of Parks, Recreation, and Historic Preservation. And for additional information on claiming this credit, see Form IT-237, Claim for Historic Homeownership Rehabilitation Credit, and its instructions.