“What To Know About Renter Credit Or Real Property Tax Credit” written by Mike Marko
Have you ever heard the term renter credit or renter’s credit? Do you know what means?
I understand I didn’t completely know what it meant when I first heard it either.
As you grow your rental property business, you will encounter many confusing terms. And it’s not uncommon for people to misuse or misunderstand the term renter credit.
That’s why in today’s blog post I will share with you information relating to renter’s credit. In addition to getting to know what it is, you’ll also get to know how tenants are eligible for a renter’s credit if a renter credit is refundable, and how your tenant can refund this renter’s credit.
What Is Renter Credit Versus a Real Property Tax Credit
Renter credit is something often referred to in a lease to own agreement.
A renter credit a discussed rebate if the tenant pays their rent or pays on time as agreed on property purchase fees during the contract. A renters credit is what a property manager can offer a rebate or discount that discounts the overall value of the contract if the agreement is fulfilled completely during the term of the contract.
Example of A Renter Credit
For instance, to realize a renters credit the tenant must fulfill the length and terms agreed to in the contract. When the contract is over and the tenant is prepared to purchase the home they receive a discount or rebate off the entire value of the contract.
If the renter fails to make a payment or is late in payments and the terms of the contract state that this action will cancel the renter’s credit. Then the contract will then go to the original amount and no discount or rebate will be given on the contract.
For example, in my lease to own contracts, I usually over a renter credit of $100 per month of the contract until the home is purchased. If the tenant fails to purchase the home then the renter credit goes away.
Lease To Own
Normally a renter credit is used when a tenant is leasing a property that is rent to own. Usually, landlords or property managers allow their tenants to purchase the rental property using renter credit, thereby helping them by discounting the value of the purchase price. This credit is only applied if the tenant agrees and fulfills the terms of the purchase contract that was agreed to.
The benefit for the rental property manager to offer a discount or rebate on the property that the tenant is purchasing is that the tenant has extra incentive to pay on time or make agreed to repairs of the property to receive the discounted price. The benefit for the tenant is to receive a discount on the purchase price by agreeing and fulfilling the contract.
If the terms of a renter credit are broken there is no actual money transferred or lost: money is normally never exchanged. Instead, any discount or rebate in final price for the property purchase is waved and the original agreed to price is reinstated minus any discounts.
Real Property Tax Credit
On the other hand, a Real Property Tax Credit is a portion of rent discounted that is allotted against the property management taxes and the tenant’s taxes. A real property tax credit is normally allotted for renters who have an average amount of income and qualify for the government program.
The term renter’s credit is often misused by property managers. Renter credit is not a Real Property Tax Credit. Real Property Tax Credit is actually a government regulated program that offers a tax credit that is actually refundable. A tenant or renter’s monthly rent contains a portion that will be allotted for the property owner’s property taxes. It’s this portion of rent that can be refundable to the tenant.
A Real Property Tax credit is most commonly available for New York residents and it is intended to help low-earning renters in paying property taxes.
The Qualifications Of Real Property Tax Credit For Tenants
When applying for a government discount or entering a government-funded program the qualifications to be accepted can be very strict and can be extremely hard to actually be able to qualify.
So who and what does it take to qualify for a Real Property Tax Credit or tax discount?
Qualifications For Property Tax Credit
A tenant is only eligible for Real Property Tax Credit if the overall income of the household is less than $18,000. Aside from that, the monthly bill or rent of the tenant must be below $450. The bills or expenses that are spent for heat, gas, electricity, and furnishings are not counted in the overall minimum amount of required monthly bills.
The general amount of the occupied or rented property must be less than $85,000. The real property taxes cover the value of the residence, garages, and land. Lastly, the tenant must be occupying or renting the rental property for at least six months to be eligible.
The qualifications of homeowners are almost the same from renters or tenants. The required minimum amount of household income is also $18,000 and they should also have lived in their home for at least six months. Property taxes for the overall amount of the property including the house, garage, and land are also included.
It’s Not A Renter Credit
As mentioned before a Real Property Tax Credit is not a renters credit even though many property managers refer to as a renters credit. The Real Property Tax Credit differs from a renters credit in that it is an actual government program that has a tax valued rebate on the rental value that must be accounted for regardless of fulfilling the terms of the contract agreed to.
How Much Is The Real Property Tax Credit
The Real Property Tax Credit or misused renters credit can be as low as $75 if all of the occupants inside the residence is below 65 years old. If the residents are over 65 years old and qualify for the government program, the amount would be as much as $375. The homeowner has the right to claim a refund if the amount of their credit is bigger than the tax they owe.
How Can A Renter Or Homeowner Claim The Real Property Tax Credit?
A tenant or homeowner must first fill up the Form IT 214 before they can claim the said refund. In the State of New York, the form must be submitted with the tenants New York State personal income tax return and completed Form IT 201.
However, for the tenant or renter to receive the tax credit they must be qualified and be accepted into the program and must complete and file the form IT 214 to claim the refundable credit.
An eligible household is limited to have one Real Property Tax Credit. The tax credit can be divided if there is more than one eligible person inside the household. Each person that is eligible for the refund must file a Form IT 214 separately.
Where To File Form IT 214?
The due date and process of filing a New York State income tax return are almost the same as the Form IT 214. The form must be sent to NYS: Tax Processing, PO Box 15912, Albany NY 12212 5192. The form must be filed between January 1, 2017, to April 20, 2020.
Here are the deadlines for submission for submittal of IT 214 from 2013 to 2015:
Year Last Date To File
2013 April 17, 2017
2014 April 16, 2018
2015 April 18, 2019
Guidelines in Filling The Form IT 214
Here are some certain guidelines that you need to follow in filling the Form IT 214:
- Only use black tint pen in filling the entries.
- Avoid using symbols or signs including dollar signs, commas, decimal points, dashes or slashes.
- Write the whole dollar amount when entering amounts on the form. Also, use round off numbers in the form. For example, $1.34 will be $1.00 or $2.50 to $3.00.
- Use X in marking the appropriate selection in the form. Never use checks inside the boxes.
There is a list of requirements when completing a tax program. I would highly suggest using a tax accountant or going directly to the State tax office to make sure you have completed all requirements to receive the benefits offered.
To know more about Real Property Tax Credit you can visit New York State Department of Taxation and Finance here.
Final Thoughts About Renter Credit
I expect this article helped you to better understand what is a renter credit versus a Real Property Tax Credit. Don’t confuse a Real Property tax credit with a renter credit because they are two completely different terms. It can trip you and your business up with any misunderstanding between these two terms.
Feel free to add any comments or questions in the section below.
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