NYS refundable tax credit for nonresident

[Susie42]

I live in MD but own a summer home in NY.  The home is not all-season and thus I am considered a non-resident of NY.  I have a mortgage on the home and earned $13.06 in interest on my escrow from a NY bank and somehow thus owe $1 in tax to NY.  My federal AGI is approx. $220k.  I had some work done on the summer home that qualified for the Historic Preservation refundable tax credit and have all the approved paperwork.  The credit is refundable in full if your NY AGI is less than $60k; if more than $60K you are ELIGIBLE to carryover the credit to additional years.  The problem is, NYS is saying yes, I qualify for the credit, but since my NY AGI is over $60k, I have to carryover the balance of the credit to next year (basically, the entire credit minus $1).  As I am a nonresident, I will never have enough income tax to get this credit, which makes no sense.  The tax credit is through the NYS Parks Dept and they claim to not know the answer; the NYS tax dept admits they don't know either, but as it stands, I'm not going to get the credit.  Can anyone help or provide any insight on this?

[NCperson]

@Susie42 - that is how non-refundable credits work... you may be surprised, but that is how it works. 

for non-refundable credits, the credit reduces the tax liability.  And in this case your tax liability is $1, so the non-refunable credit is $1, leaving the liability at zero.

If you decide to sell this property in your lifetime, there presumably will be profit and you'll be able to use the non-refundable credit at that time. 

same thing can occur on the federal side as well: some tax credits are non-refundable and they can carry over for years and years if there is no income tax liability. 

[LenaH]

You are not able to take the refundable portion of the Historic Homeownership Rehabilitation Credit because of your NYS AGI. If you look at Form IT-203, you will see that your NYS AGI is actually calculated as if you were a full year resident of NYS. This calculated amount will be used on Line 32, which then flows into the calculation of your NYS taxable income and the NYS base tax on Line 44. It isn't until Line 45 that your NYS "source income" is used to calculate your NYS income percentage. This percentage is then applied to your total NYS tax calculated on Line 44 to calculate your actual tax liability. 

If you preview your IT-203 as it is, you will see that your NYS AGI at the end of page 2 will be closer to your federal AGI of 220,000. What that number is depends on the items of your return that NYS may or may not tax. However, it will not be just your NYS source income from the NYS bank in which you owe $1 of NYS tax on. 

Therefore, you likely do not qualify for the refundable amount of the credit because your NYS AGI is over $60,000 and you will have to carry forward the remaining credit amount. 

Lastly, TurboTax does not support Form IT-237, Historic Homeownership Rehabilitation Credit and therefore, cannot be added to your IT-203 using either the desktop or online version.   

@Susie42 

[Susie42]

Thank you, but this credit is refundable?

[Susie42]

Oh my gosh, I think I get it now.  Are you saying that the credit is ONLY refundable if my NY AGI is less than $60k?  That's the key point that I'm asking/don't understand.  Everything I read says the credit is refundable, which I am interpreting as meaning they will give it to me no matter what.  But perhaps that means that I can continue to carry it for successive years but will only get it back in cash if my AGI is less than that $60k.  Is that what you're saying?  If so, then as I have no NY taxes, I will basically never get this refund as there is no way to say I don't want to carry it over to successive years?

[LenaH]

Yes, that is correct. According to NYS, the credit is refundable only if your NY AGI is $60,000 or less. If your NY AGI is greater than $60,000, you can only carry forward the excess credit to future years. Please see the screenshot below from the linked NYS website.

Since the credit is nonrefundable in your tax situation, the carry forward of the credit can only be applied to future NYS tax liability. 

@Susie42