Taxes and New York State. When the two are said in the same sentence it usually met with “gasps” and “eye rolls” that can be heard and seen miles away. It is no secret that New York State has high taxes, with some suburbs outside of New York City paying the highest income taxes in the nation. This often leads to relocation of businesses and individuals. One review by Gannett found that New York has the “highest out-migration rate of residents in the nation.” This all leads to the implementation of programs to help individuals and businesses such as Start-Up NY, and the Excelsior Jobs Program.
With this being said there are many great reasons to live in New York and many individuals, and business who call the state home. DeJoy, Knauf & Blood, and myself, being two of them. If you are also one of the businesses or individuals that call New York State home, it is important to understand all of the New York State (“NYS”) Tax Credits available to you, to help reduce your tax liability.
Below is a summary of some of the tax credits I find most valuable, and widely used with my clients. For a complete listing of all of the tax credits NYS offers contact myself or one of DKB’s team members. You can also find general information at either of the two following links:
- https://www.tax.ny.gov/pit/credits/more_income_tax_credits.htm
- https://www.tax.ny.gov/bus/ct/article9a_tax_credits.htm
1. MINIMUM WAGE REIMBURSEMENT CREDIT
Who can claim it?
New York refundable tax credit that employers may be able to claim if they employ eligible employees that are paid the New York minimum wage during some part of the tax year, as defined in Article 19 of the NYS Labor Law.
Interesting Fact(s):
This is a refundable credit which means that even if a client has no NYS tax liability they can still claim a refund for the amount of the credit.
Real Life Scenario:
This credit has saved one of my clients approximately $12,000, and is expected to generate an additional tax savings of $18,000 from 2017 to 2019. The client’s total savings related to this credit is expected to be approximately $30,000.
2. SPECIAL ADDITION MORTGAGE TAX CREDIT
Who can claim it?
This is a NYS nonrefundable, and in some cases refundable, tax credit for individuals or businesses that paid special additional mortgage recording tax. This tax was paid to record a mortgage on or after 01/01/04, on real property located in New York (exceptions apply for mortgages located in certain counties or mortgages made by certain types of lenders).
The credit can be claimed by either the lender or the borrower that paid the special additional mortgage recording tax. The party that claims the credit must be the party that actually paid the special additional mortgage tax.
Interesting Fact(s):
This credit can be applicable to any taxpayer refinancing or taking out a mortgage but is especially important for clients that operate in the real estate industry as they tend to take out many mortgages and participate in many refinances.
Real Life Scenario:
With the application of this credit, the total tax benefit to one of my clients was approximately $10,000, even though no New York tax liability was generated. Another client with a similar situation saved over $100,000 related to this credit in 2015 alone.
3. MANUFACTURER’S REAL PROPERTY TAX CREDIT
Who can claim it?
New York tax credit for qualified New York manufacturers that pay real property taxes on property in New York that is owned or leased. The property must be principally used during the tax year for manufacturing, processing, assembling, reining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing.
Interesting Fact(s):
The credit amount is 20% of the eligible real property taxes paid during the tax year.
Real Life Scenario:
This has saved one of our manufacturing clients almost $24,000 in the past three years.
4. INVESTMENT TAX CREDIT
Who can claim it?
Businesses are entitled to this credit if they placed qualified property into service during the tax year. The credit is refundable if you are classified as a new business and nonrefundable otherwise. Any unused nonrefundable credits can be carried forward for 10 years (15 years for C Corporations).
Interesting Fact(s):
To qualify for this credit new or used intangible personal property or other tangible property (such as buildings and structural components of buildings) must meet the following criteria:
- is depreciable under Internal Revenue Code (IRC) sections 167 or 168
- has a useful life of four years or more
- is acquired by purchase as defined in IRC section 179(d)
- is located in New York State
- is one of the following types of property:
- manufacturing and production property
- retail enterprise property
- waste treatment property
- pollution control property
- research and development property
- qualified film production property.
Real Life Scenario(s):
This credit saved one of our clients that is in the business of fabrication over $13,000 on a new machine purchased. We saw another one of our manufacturing clients save $29,880 by utilizing this credit.
5. EMPLOYMENT INCENTIVE CREDIT
Who can claim it?
This credit can be claimed if you have previously claimed the investment tax credit (except for research and development property), and have increased your average number of employees in New York State to at least 101% of your number of employees in New York State during your base year.
Interesting Fact(s):
The business can claim this credit if eligible for the two years after the investment credit is claimed if the employment increase numbers are met.
The credit may be refundable if it is a new business, otherwise the credit is nonrefundable. The nonrefundable credit may be carried forward for 10 years if it is not able to be used (15 years for C Corporations).
As small businesses make up 98% of New York State’s economy, and employ more than half of New York State’s private sector workforce it is important that there are tax credits to give them, and those who work for them, reprieve. The listing above, is only a piece of all of what New York State has to offer. However, with the federal government still in debate, as to what version of the Tax Bill will be passed into law, we will have to wait and see what other curveballs may be thrown to the businesses and individuals in New York State.
