NY help needed --- Form IT-256

[FEDUKE404]

I am assisting an out of state client (former NY resident) who at the time of home purchase paid what is shown as "mortgage tax" on the closing statement.

The tax appears to have been calculated at the rate of 75¢ per $100 of mortgage, which is consistent with the published rate for that county.

Is it likely that the funds paid by the purchaser at closing do fit into the required category of "special additional mortgage recording tax" as required to use the Form IT-256?

If so, it appears that the entire amount of the mortgage tax can be refunded (there is sufficient NY tax liability for the year). Does that sound logical to the NYers who deal with this issue on a regular basis?

Also, may I assume any decisions to opt in/out using the calculated amount as a NY refundable credit is more or less a moot point under these circumstances, namely simply take the money and run.

I just wanted to be certain I was not missing something, especially with the way NY taxes have been going recently, before breaking the good news to the client.

Oh yes: The home was purchased in late 2008 (amended return in play) and will be sold within the next few months. The client had a job transfer. Is the pending sale in any way an issue to this potential tax credit?

Thanks in advance to whoever can lead me through this maze.....

FE

[New York Enrolled Agent]

Generally the additional tax is paid by the LENDER on a residential mortgage. In addition, I believe the credit is not available in the New York counties in the downstate & Buffalo areas. Your best bet is to go to www.nystax.gov and you can get the instructions for the form with all the gory details.

[FEDUKE404]

To me the credit appears applicable

Generally the additional tax is paid by the LENDER on a residential mortgage. In addition, I believe the credit is not available in the New York counties in the downstate & Buffalo areas. Your best bet is to go to www.nystax.gov and you can get the instructions for the form with all the gory details.

NYEA -

Although I have contacted the attorney who handled the (residential property) sale, the mortgage tax is plainly shown on the closing statement as one of the purchaser's expenses. Perhaps they got snookered? Since you have stated the lender normally pays the tax, is there an unusual situation occurring here??

There are indeed several metropolitan areas of NY where the credit does not apply, however that is not an issue with this transaction.

I've read the NY instructions until I'm blue in the face. As best I can tell, the full amount of the mortgage tax paid by the buyer at the time of this purchase can be refunded. One would think the same process would apply to most NY folks who pay it (since it is a refundable credit!) except those in the "big city." The logic escapes me on the need for the tax, unless it is an indirect way to boost the income of real estate attorneys and/or tax professionals....and, of course, the government funds of those metropolitan areas.

In any case, I figured there might be a couple of TTB members from NY who had already fought this battle and could recount their experiences!

Thanks for your input.

FE

[BOB W]

NYEA -

Although I have contacted the attorney who handled the (residential property) sale, the mortgage tax is plainly shown on the closing statement as one of the purchaser's expenses. Perhaps they got snookered? Since you have stated the lender normally pays the tax, is there an unusual situation occurring here??

There are indeed several metropolitan areas of NY where the credit does not apply, however that is not an issue with this transaction.

I've read the NY instructions until I'm blue in the face. As best I can tell, the full amount of the mortgage tax paid by the buyer at the time of this purchase can be refunded. One would think the same process would apply to most NY folks who pay it (since it is a refundable credit!) except those in the "big city." The logic escapes me on the need for the tax, unless it is an indirect way to boost the income of real estate attorneys and/or tax professionals....and, of course, the government funds of those metropolitan areas.

In any case, I figured there might be a couple of TTB members from NY who had already fought this battle and could recount their experiences!

Thanks for your input.

FE

I didn't even know about this credit and over the years was never asked by a client to apply for it. I read the instructions (briefly) and am at a loss to understand how it works, but that is me.

The issue is finding what is the SPECIAL ADDITIONAL MORTGAGE RECORDING TAX. As far as I know, all NYS home closings pay a mortgage recording tax, which is not what they are talking about for the credit.

Sorry no other help from me.

[New York Enrolled Agent]

NYEA -

Although I have contacted the attorney who handled the (residential property) sale, the mortgage tax is plainly shown on the closing statement as one of the purchaser's expenses. Perhaps they got snookered? Since you have stated the lender normally pays the tax, is there an unusual situation occurring here??

Feduke

NY taxes everything. All mortgages have recording taxes listed on the closing statement.

I'll paste a snip from a NYS state assembly document. No comment on the first sentence.

The mortgage recording tax (MRT) is an excise tax on the privilege of recording a mortgage. The MRT consists of many separate taxes. The total amount of the tax depends on the taxes that are in effect in the county and, where applicable, the city where the real property is located. ... Revenues from the "basic" tax of $0.50 per $100 are distributed to towns and cities. Revenues from the "special additional" tax of $0.25 per $100 go to SONYM and, in counties in the metropolitan commuter transportation district (MCTD) and Erie County, some revenues go to special transportation assistance funds. Revenues from the "additional" tax of $0.25 per $100, where imposed, typically benefit regional transportation authorities.

I suspect that your client paid the "basic" mortgage recording tax. The buyer always pays that. When I said about the lender is my understanding of the special additional tax and not the basic. There is no credit for your ordinary basic mortgage tax. Obviously, none of us other than you has looked at the closing statement so we might be missing something but I'm led to believe you just have the basic tax.

[FEDUKE404]

So SOME qualifies, perhaps?

NYEA -

Thank you for hanging in there with me on this.

As I stated in my original post, the tax was paid at the rate of 75¢ per $100 of mortgage (and an adjacent county charges $1.00 per $100 of mortgage).

From your explanation, that would seem therefore to indicate that 25¢ per $100 (or one third of the total "mortgage tax" as shown on the closing statement) could qualify for the Form IT-256 tax credit??

I've heard of gray zones in the areas of tax laws, but this one seems more like one which belongs in the Twilight Zone!

But to show you NY is not alone, NC plays similar games. When a person purchases an automobile, they do NOT pay sales tax on the vehicle but instead a "highway use tax" which also goes to the privilege of operating a buggy on the state roads. When the possible use of state sales tax tables (as an optional replacement for the state taxes itemized deduction) reappeared several years ago, a thorough reading of the rules would not allow a NC resident to add the amount paid to the "sales tax" tables. Supposedly the newest 2009 Congressional goodie for new vehicle auto sales tax has things worded a big differently.

So it looks as if for now I am at a dead end on this problem. I have made a request to the closing attorney for an explanation, but that could take a while.

FE

[New York Enrolled Agent]

NYEA -

As I stated in my original post, the tax was paid at the rate of 75¢ per $100 of mortgage (and an adjacent county charges $1.00 per $100 of mortgage).

From your explanation, that would seem therefore to indicate that 25¢ per $100 (or one third of the total "mortgage tax" as shown on the closing statement) could qualify for the Form IT-256 tax credit??

I really can't give you a definitive answer.

50 cents for the basic, maybe 25 cents for the additional and 0 cents for the special additional. Thus no credit???????

The additional and the special additional are different.

[FEDUKE404]

Word of the day is "special" ?

I really can't give you a definitive answer.

50 cents for the basic, maybe 25 cents for the additional and 0 cents for the special additional. Thus no credit???????

The additional and the special additional are different.

But what is "is" ??

Looks as if there is some "additional" but probably not any "special additional"??

I guess I'm at the mercy of the attorney/bank to provide me more details of the event.

The below may be of some interest:

§ 187. Credit for special additional mortgage recording tax. 1. A
taxpayer shall be allowed a credit, to be credited against the taxes
imposed by this article, other than the taxes and fees imposed by
sections one hundred eighty, one hundred eighty-one, one hundred
eighty-six-a and one hundred eighty-six-e of this chapter. The amount of
the credit shall be the amount of the special additional mortgage
recording tax paid by the taxpayer pursuant to the provisions of
subdivision one-a of section two hundred fifty-three of this chapter on
mortgages recorded on and after January first, nineteen hundred
seventy-nine.

Thanks again!!

FE

[FEDUKE404]

FINALLY an answer on NY IT-256 issues!

With zero thanks to a certain NY bank/mortgage company located in Ontario County, but with gratitude to a helpful paralegal in the same general area, I was able to obtain the relevant facts.

The new mortgage incurred a "mortgage tax" at the rate of .50¢, an "additional mortgage tax" at the rate of .25¢, and the "special additional mortgage tax" at the rate of .25¢.

By (local?) convention....see first comment above....the new homeowner paid the first two taxes at closing, and the mortgage company/bank apparently paid the "special" tax.

Bottom line: NY Form IT-256 cannot be used by the homeowner, as it only applies to the "special" tax and also must have been paid by the new mortgage owner. (I think the bank can recover the fee?? - but "frankly, my dear.....")

Thanks for the comments posted here. Perhaps this experience can benefit some others who are faced with similar NY questions!

FE