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New York State’s Mortgage Recording Tax Credit – Do You or Your Business Qualify?

Here’s an important reminder to taxpayers in the New York real estate and construction industries: Don’t forget that you or your business may qualify for the state’s Special Additional Mortgage Recording Tax Credit. In our experience, this tax credit is one of the most frequently overlooked advantages to taxpayers in this industry sector, and it can significantly reduce tax liability.

When a mortgage is recorded in the state of New York, it is subject to a special additional recording tax of approximately 25 cents for every $100. An equal amount may be taken as a credit on New York state taxes. The law became effective in 2004.

This credit applies to new mortgages, refinanced commercial real estate, and certain residential real estate. Estates, trusts, and beneficiaries of estates and trusts may also qualify for this tax credit.

The New York Special Additional Mortgage Recording Tax and its related credit most commonly affect partners, partnerships, or members of limited liability companies (LLCs). It also applies to S corporations, although, in those cases, legal structure will determine who gets the tax credit.

As the economy improves, the real estate experts at Margolin, Winer & Evens see more activity in companies buying property, so it’s important to remember this valuable and often-overlooked tax credit. After all, it offers a $25,000 credit for every $10 million in new mortgages recorded.

Please note that there are some exceptions for eligibility for this credit. For example, residential mortgages in certain counties in New York (including Erie County), as well as certain commuter transportation district counties (including New York, Bronx, Queens, Kings, Richmond, Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester) may be ineligible. Some other exceptions also apply.

One particularly nice benefit of this tax credit is its potential for extended lifespan. If the earned credit exceeds the amount of tax due for the year, the balance of the credit can be carried over and applied to the following year’s taxes. Or, the taxpayer can treat the remaining credit as excess and receive the balance back as a cash refund. Often in the world of taxes, credits are not refundable, so this feature makes the New York Special Additional Mortgage Recording Tax Credit especially important not to overlook.

Taxpayers who have already filed their tax returns for a year when they were entitled to this credit but overlooked it may amend their tax returns to receive the credit if the year is still open. Taxpayers who are unsure if they paid this tax or whether they are eligible for it should contact the real estate experts at Margolin, Winer & Evens, who can review their tax returns, determine their eligibility, and assist with ensuring they receive any tax credit due to them.

For more information, please contact John Schmuck.