New York State has its own first time home buyers tax credit apart from the expiring Federal tax credit. Unlike the $8,000 tax credit, it is not expiring and is not a one shot deal. A person with a Long Island Mortgage or any first time home buyer in New York State can use this tax credit year after year. If you are purchasing a home in a SONYMA target area, the purchaser does not have to be a first time home buyer. SONYMA has list of target areas in each county. The target areas are not necessarily low income or poor areas. For example, Suffolk County on Long Island has two target areas, Bay Shore, which hardly a low income area and Sag Harbor, which is an upscale summer community.
Here is how it works. You must apply to a bank that is an approved State of New York Mortgage Authority (SONYMA) lender. The loan would be processed like any conventional or FHA Long Island mortgage or any property in New York State. The loan would be submitted to SONYMA to receive the mortgage tax credit.
A borrower must meet the following criteria:
The property must be 1-4 families, including condos and coops, and owner occupied.
- Meet the SONYA purchase price limits. This varies from county to county in New York State. For example, in Albany County the purchase price limit for a 1 family is $273,050. In New York City, it is $637,640. The purchase limits for 2, 3 or 4 family units are higher. In addition, if the house is in a target area, the purchase price is higher.
- Meet the SONYMA income limits. Again this varies from county to county. In Erie County, the income limit is for a family of 4 is $78,085. In Nassau County it is $142,520. Again, if the house is in a target area, the limits go up.
How much is the tax credit?
The borrower can convert 20% of their annual mortgage interest into a tax credit that can be deducted dollar for dollar from the Federal income tax liability. The remaining 80% of the mortgage interest continues to qualify as an itemized tax deduction. The credit can be taken to reduce the borrower's tax burden every year for the life of the mortgage. For example, let us show how this tax credit would work for a house is Saratoga County. Let us assume the buyer will have a $200,000 mortgage at a 5.5% rate and earns $53,000 a year. The income, real estate taxes and exemptions are SONYMA averages for Saratoga County. Obviously, each borrower will be different.
Without tax credit With tax credit
Deductions:
Mortgage Interest $11,000 $8,800
Real Estate Taxes $ 3,600 $3,600
Exemptions $6,800 $6,800
Taxable Income $31,600 $31,600
Tax Liability $ 3,938 $ 4,268
Tax Credit (20%) 0 $2,200
New Tax Liability $3,939 $2,068
Annual Tax Savings 0 $1,870
Monthly Savings 0 $ 156
As you can see the borrower can save substantial money on his Long Island Mortgage or any mortgage in New York State. If the borrower's tax liability is less than the tax credit it can be rolled over for up to 3 years. This is a great service to give to your buyers to mention this program. It may enable them to afford a home and save them money year after year.
Comments(2)