Tax Refund Advice for NYC Homeowners & Renters

Many New Yorkers have questions about their tax deductions this time of year. The most common (as you may have guessed)? How to make a tax bill as teensy as possible — or, better yet, how to get a tax refund? For the best advice on your unique financial situation, you should, of course, consult a tax professional well in advance of the April 15, 2021 filing deadline. That said, we polled a couple of pros for their overarching tax advice on making a big refund possible — legally — including mortgage interest deductions for 2020 and write-offs for your home office.

Hell’s Kitchen

393 West 49th Street

$539,000

Studio
|

Yorkville

345 East 81st Street

$379,000

Studio
|

NoMad

66 Madison Avenue

$500,000

Studio
|

Murray Hill

10 Park Avenue

$490,000

Studio
|

Midtown South

159 Madison Avenue

$449,000

Studio
|

Kips Bay

330 Third Avenue

$649,000

1
|

Lenox Hill

175 East 62nd Street

$348,000

1
|

Lenox Hill

300 East 62nd Street

$549,000

Studio
|

Lenox Hill

166 East 61st Street

$549,000

Studio
|

Hudson Heights

200 Pinehurst Avenue

$495,000

1
|

Upper West Side

157 West 79th Street

$599,000

1
|

Yorkville

130 East End Avenue

$499,000

Studio
|

Can Mortgage Interest Be Deducted in 2020?

We asked Xintian Wang, CPA, and a Senior Tax Manager at a Dimov Tax Specialist for a response. “If you own a condo or a co-op in NYC with a mortgage, you can deduct mortgage interest on the first $750,000 of the loan with a single or married filing jointly status.”

But there’s a twist if you are married and filing taxes separately. You can only deduct interest paid on the first $375,000. Did you take out a mortgage before December 16th, 2017? Here’s some good news. You can deduct interest paid on the first $1 million. However, if you are married and filed separately, the number is reduced to $500,000, Wang says. “Mortgage points you paid also qualify for deductions.”

Deductions apply to second homes, too, says Aaron Smyle, MBA, MST, EA, founder of Manhattan-based Smyle and Associates, LLC. The $750,000 worth of principal limitation was introduced by the Tax Cuts and Jobs Act (TCJA) and will revert to $1 million after 2025, Smyle says.

Sunset Park

548 46th Street

$617,500

2
|

Brighton Beach

35 Seacoast Terrace

$529,000

1
|

Sheepshead Bay

1237 Avenue Z

$378,000

1
|

Sheepshead Bay

527 Avenue X

$315,000

1
|

Crown Heights

425 Prospect Place

$449,000

1
|

Sheepshead Bay

3235 Emmons Avenue

$389,000

2
|

Bay Ridge

7101 Shore Road

$625,000

2
|

Gravesend

2650 Ocean Parkway

$389,000

1
|

Coney Island

2928 West 5th Street

$385,000

2
|

Sheepshead Bay

3025 Ocean Avenue

$315,000

2
|

Bedford-Stuyvesant

627 De Kalb Avenue

$635,000

1
|

Bedford-Stuyvesant

335 Nostrand Avenue

$575,000

1
|

Can You Get a Tax Refund for Home Office Deductions in 2020?

Unfortunately, W2 employees are no longer able to take a write-off for home offices due to the Tax Cuts and Jobs Act. “If you are self-employed or an independent contractor, you can deduct home office expenses and any expenses that are related to your job,” Wang says.

But getting a tax refund is not as easy as checking a “worked from home” box on your taxes. “If you’re looking to take the deduction, the office portion of your home has to be used exclusively as an office,” Smyle says. The sofa where you eat takeout and watch Netflix won’t cut it. “There’s also a formula for determining the amount to deduct for a home office based on the size of your home. For example, if your home office is 200 sq. ft, and your apartment is 800 sq. ft., your workspace is 25% of your home. Afterward, that percentage is applied to total yearly rent and utilities, or if you own, it’s applied to mortgage interest, maintenance, and utilities.”

If you live in New Jersey and work in New York, you may be worried about having to fork over taxes in both states. You will need to file a New York tax return and pay taxes on income earned in New York. The bright spot? You will get a tax credit for earned income in New York for New Jersey, so you’re not paying state taxes on the same income twice. Phew!

Stuyvesant Heights

625 Halsey Street

$1,999
No Fee

1
|

Columbia St Waterfront District

19 Carroll Street

$2,000
No Fee

1
|

Bedford-Stuyvesant

337 Herkimer Street

$1,835
No Fee

Studio
|

Bushwick

1121 Broadway

$2,400
No Fee

4
|

Crown Heights

1482 Pacific Street

$2,535
No Fee

3
|

Williamsburg

118 Seigel Street

$2,565
No Fee

2
|

Gowanus

76 16th Street

$2,100
No Fee

1
|

Bushwick

115 Suydam Street

$2,700
No Fee

2
|

Crown Heights

2288 Atlantic Avenue

$1,995
No Fee

2
|

East Williamsburg

245 Devoe Street

$2,400
No Fee

2
|

Williamsburg

173 Ainslie Street

$1,900
No Fee

1
|

Greenwood

725 Fourth Avenue

$1,800
No Fee

2
|

What’s the Deal With Property Tax Deductions for 2020?

“This year particularly, there is going to be a lot of scrutiny on the concept of residency,” Smyle says. “With the ability to work remotely, a lot of people have been out of the city during 2020 and want to see what they can do to minimize their tax liability. Intent is one of the biggest factors determining residency status and a temporary living situation. It would not absolve one from having to pay income taxes here in the city.” Smyle advises being extra careful if you’re trying to change your status to “non-resident” for tax purposes. “There are a lot of items that need to be in place to properly, and ethically, make that claim.”

Wang notes that if you pay real estate tax or property tax, you can add that to your itemized deduction for a potential tax refund. But the total tax deductions, including state and local taxes, are capped at $10,000 ($50,000 if married filing separately) on the Federal side. “For New York purposes, the deductions are not subject to the Federal limit,” she says.

Newport

1 River Court

$2,925
No Fee

2
|

Historic Downtown

284 Monmouth Street

$2,700

2
|

Journal Square

845 Newark Avenue

$2,000

2
|

Waterfront

160 1st Street

$2,700

1
|

Paulus Hook

70 Greene Street

$2,144
No Fee

Studio
|

Paulus Hook

155 Washington Street

$2,626
No Fee

2
|

Paulus Hook

155 Washington Street

$2,233
No Fee

1
|

Paulus Hook

155 Washington Street

$2,306
No Fee

1
|

Newport

45 River Dr South

$3,000

2
|

Jersey City

390 Ogden Avenue

$2,440

4
|

Jersey City

249 Winfield Avenue

$2,300

3
|

Paulus Hook

207 Van Vorst Street

$2,964
No Fee

1
|

Are Home Improvements Eligible for Tax credits?

Call it the HGTV effect. It’s possible to write off home equity loan interest if you used the loan for renovations on your place — but only if they’re substantial improvements. Sorry, repainting the bathroom doesn’t count. What’s another way to nab a potential tax credit? If you installed energy-efficient upgrades — including qualifying energy-efficient windows. You can likely apply for a credit of 10% or more. But before doing, please, consult with a tax professional.

NYC’s Enhanced Real Property Tax Credit for Renters

If you live in a rental, rejoice! “Renters in New York City may claim a tax credit on their state tax returns,” Wang says. “If you lived in the same apartment or house for at least six months, are a full-year NYC resident, and your household income is below $200,000, you are eligible for a credit up to $500. The credit also applies to taxpayers who own properties and pay real estate taxes.”

If you gleaned nothing else from this article, take this advice from Smyle to heart as you prepare for your possible 2020 tax refund: “As we are approaching year-end, you should start to get your financial documents in order. Remember, shoeboxes are for shoes, so get your receipts itemized and organized.” Spoken like a true tax pro.

—

Whether you’re looking to rent or to buy, find your next NYC apartment on StreetEasy.

Tax Refund Advice for NYC Homeowners & Renters