Guide to Banking 2022_02_11

Guide to & Personal Finance A Blank Slate Media Special Section • F e b r u a r y 11, 2 0 2 2

28 Blank Slate Media Newspapers, Friday, February 11, 2022

L.I. property tax – Where are we?

Tax cap has slowed increase in taxes, higher business rates reduce bite on residents

BY D O U G L A S AT K I N S Long Islanders pay some of the highest property taxes in the nation, and most of that goes to fund our very strong school districts.

After schools, the next biggest use of your tax funds is police, followed by a variety of other essential services: garbage, roads, parks and several others.

Douglas W. Atkins

Towns, counties and school Districts are municipal corporations with financial obligations, similar to an ongoing business. The most significant source of revenue for these government entities is the annual property tax levy.

This is the amount of money that must be raised by taxing each and every property owner within its geographic district.

Property owners do not only mean homeowners, but also

the owner of every parcel of commercial real estate.

This includes your favorite shopping centers, movie theaters and gas stations. All properties contribute to the tax levy in proportion to their assessed value (more on that below).

All of these taxing entities have one thing in common: since 2012, they have been subject to New York State’s Tax Cap Law.

In simple terms, the Tax Cap Law limits each district’s ability to raise its tax levy by the lessor 2% or the rate of inflation. In the years leading up to the Tax Cap Law, the average school tax increase was 3-6% per year. Since the Tax Cap Law has been implemented, the range of increase is .1% to 2%.

On its face, this does not seem like a stark difference, but the numbers tell a whole different story. Take a $12,000 tax bill and escalate it 1% for five years straight. The result would be an aggregate increase of 5.1% and a tax bill of $12,612 in year five.

Now take the same $12,000 tax bill and increase it 5% per year, again for five years. The result in year five is an astounding 27.6% increase, totaling $15,315! Consider what those trends mean over ten years or more.

Thankfully, the Tax Cap Law worked. While it does not feel like it, taxes have actually become more affordable on Long Island. This does not mean our taxes are low. They are not, and they still greatly exceed the property tax in other parts of the country, particularly for commercial real estate.

With the tax levy being one half of the calculus going into a tax bill, a property’s assessment (valuation) is the other half.

A higher assessment means a larger property tax bill; a lower assessment is the opposite.

On Long Island, the assessing is done either by Nassau County or by your local Town in Suffolk.

Assessing is a difficult task: every piece of real estate is unique and its valuation changes each year. Assigning a fair assessment is more art than science.

Making matters even more difficult was the pandemic, which resulted in uneven change in values among property segments.

Industrial properties and homes increased significantly over the last two years. Meanwhile, office buildings and properties where crowds congregate (i.e., malls, cinemas, restaurants) were battered. A municipal tax assessor must accurately capture those market changes.

It is often said, the three most important things in real estate are location, location and location. Assessment is no different. Because assessment laws vary by which county and town a parcel is in, commercial property

owners pay higher taxes in certain parts of Long Island.

For example, Nassau County creates four classes of real estate: houses, apartments, utilities and finally, commercial real estate.

Nassau commercial real estate can be taxed at rates almost three times higher than equally assessed houses. The Town of Islip is similar in that it classifies properties as either a home or business, and again, the latter has the heavier tax burden.

This business hostility is actually the exception, not the norm. There are 13 towns on Long Island. In nine of those towns, businesses are taxed at the same level as homes.

This means their share of the tax burden is the same, provided that their assessments are the same. In Hempstead, North Hempstead, Oyster Bay and Islip, business properties pay more, enabling homes to pay less.

So, what can you do about your taxes?

The first thing is to pay attention to your annual tax assessment. That assessed valuation is the sole item of your tax bill where the law allows you to contest it annually.

You should talk to a property tax attorney to ensure that your valuation is fair and that you are not being over-charged.

Secondly, we all have the right to vote for our school budgets and for our town and county representatives. Even if you think your taxes are fair, you should inform yourself on how your local government money is spent.

Finally, you should be aware of any exemptions (tax discounts), particularly for senior citizens.

Staying apprised your property tax burden is an active process that you should not leave on auto-pilot.

Only by paying attention to your business (or house) finance along with your local government spending, can you minimize your annual property tax burden. Commercial real estate taxpayers, in particular, should be consulting with an attorney at least once per year.

Douglas W. Atkins is a partner at Forchelli Deegan Terrana LLP in Uniondale, NY. He is a member of the firm’s Real Estate Tax Certiorari practice group.

Blank Slate Media Newspapers, Friday, February 11, 2022

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Real estate financing options The decision to buy a home is significant. Real estate is the biggest investment the average person will make in his or her lifetime, which underscores just how significant the home buying decision can be.

The real estate experts at Zillow recently reported that the national median price of a home in the United States is $272,446.

However, since the National Association of Realtors reported a record low housing inventory late in 2020, the average house price has been rising rapidly nationwide. The Federal Reserve Bank of St. Louis estimates the median home sales price at $374,900, and certain states have much higher prices.

WOWA, a real estate and finance technology company, says the average sale price of a home in Canada was $679,051 in July 2021.

Most people do not have $300,000 to $600,000 in savings on hand to purchase a home in cash. That means they'll need to rely on financing to pay for their dream homes.

Conventional lending Conventional lending refers to when a bank or another financial institution loans a home buyer money to buy a home. This is one of the most common ways to fund a home purchase. Personal credit score as well

as credit history help determine eligibility and interest rates for conventional loans.

Availability of assets as well as income level are some additional determining factors.

Conventional loans are traditionally 10-, 15or 30-year notes and will require a certain percentage as the down payment to secure the loan. The bank will determine the down payment requirement, which is typically somewhere between 3 and 20 percent.

FHA loan A Federal Housing Administration loan is issued by an FHA-approved lender.

These loans are designed for low-to-moderate-income borrowers, according to the financial guide Investopedia. FHA loans require lower minimum down payments and lower credit scores than many conventional loans. FHA loans also require mortage insurance up front, plus annually for 11 years or the life of the loan depending on the length of the loan.

HELOC A Home Equity Line of Credit, commonly called a HELOC loan, borrows against the available equity in your home to create a line of credit, much like a cred-

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it card. These funds can be used for large expenses or to consolidate higher-interest rate debt on other loans, according to Bank of America. It may be possible to use a HELOC to secure funding to make improvements to a home for those who want to flip it as an investment property.

Private money lenders Individuals investing in real estate who do not intend to use a property as a primary residence may turn to private money lenders. These investors can tap into capital from personal connections and lend at specified interest rates and payback periods, according to Fortune Builders, a real estate investing resource. Keep in mind the interest rate will likely be higher with a private lender than through a conventional

lender. The repayment term also will be shorter.

VA-backed loan The U.S. Department of Veterans Affairs has a program for acquiring loans through conventional lenders that will be partially guaranteed against loss through the VA. This enables a lender to give better loan terms, such as the option to pay no down payment. Interested parties need to qualify for a Certificate of Eligibility and then work with qualified lenders.

People have several options to finance the purchase of a home. These loans can help make the dream of home ownership a reality. Potential buyers are urged to speak with mortgage professionals or financial planners to consider their options.

30 Blank Slate Media Newspapers, Friday, February 11, 2022

How to prepare for tax season April is synonymous with many things. Many people get their first glimpse of spring blooms in April, while families of faith look forward to gathering for Passover and Easter. Sports fans may welcome the return of professional baseball in April, while scholastic athletes may associate April with the return of spring sports. Though each of those things tends to be welcomed with open arms, one day in mid-April

may not be greeted so warmly.

Each year in the United States, April 15 marks the official deadline for taxpayers to file their tax returns. Taxpayers in the United States must file their returns by this day or face penalties.

Though the filing deadline may be in mid-April, it’s wise for taxpayers to begin preparing to submit their returns much earlier than that. For those who have not done so in the first two months of the

year, March is a great time to begin preparations to ensure returns are accurate and filed on time.

The Internal Revenue Service offers the following advice to taxpayers who want to get a head start on their returns so they make sure they file on time in 2021. · Gather and organize your records. Many people rely on a professional to work on their returns, and April is such professionals’ busiest time of year. As a result, it’s

imperative that taxpayers have all their necessary documents ready prior to their appointments. Any delays could force appointments to be rescheduled, and there’s no guarantee tax professionals will have any open dates on their calendar as the filing deadline draws closer. The IRS notes taxpayers will need their W-2s from employers, forms 1099 from banks and other payers and other income documents and records of virtual currency transactions. In addition, people who received an Economic Impact Payment in 2020 should make sure they have Notice 1444, which includes the amount of the payment and how it was received, as they will need that to file their returns. It’s also important that people who received unemployment income recognize that such income is taxable, so they will need a record of that income, especially if they did not pay taxes on it when it was received. · Where applicable, confirm your Individual Taxpayer Identification Number has not expired.

The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social

Security number from the Social Security Administration. The IRS notes that all ITINs not used on a federal tax return at least once in the last three years expired on December 31, 2020. In addition, all ITINs issued prior to 2013 with middle digits of 88 expired at the end of 2020. ITINs with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99 that were assigned before 2013 and have not already been renewed also expired at the end of 2020. Visit www.irs.gov to learn more about ITINs. · Contact your tax professional. 2020 was a complicated year, and that figures to create some unique challenges as people file their 2020 tax returns. So it pays to contact your tax preparation professional with any questions you have well in advance of April 15. That’s true for all taxpayers, but especially so for anyone who filed for unemployment, received an Economic Impact Payment or dealt with any other abnormal circumstances in 2020 that could affect their tax returns.

Taxpayers may face unique challenges as they begin to work on their 2020 tax returns. More information is available at www. irs.gov.

Pitfalls to avoid falling into debt High consumer debt can compromise individuals' financial futures and have an adverse effect on their overall health. Debt has long been an issue that threatens individuals' well-being, but the good news is that certain debts seem to be on the decline.

According to the "Quarterly Report on Household Debt and Credit" that was released in May 2021 by the Federal Reserve Bank of New York, credit card balances were $157 billion lower by the end of the first quarter of 2021 than they had been at the end of 2019.

Authors of the report credit that decline to paydowns by buyers and reduced consumption opportunities related to the pandemic.

Individuals who want to avoid debt can keep an eye open for these pitfalls. · Retail credit cards: Many retailers offer their own credit cards. Consumers may be enticed to sign up for such cards by the opportunity for instant, and often significant, savings.

For example, a home improvement store may offer an im-

mediate 25 percent discount to customers who sign up for a store credit card and use the card to make a purchase. As enticing as such savings can be, consumers should recognize that a recent study by CreditCards.com found that the average retail credit card APR is 25.9 percent. That's more than 6 percent higher than a general purpose credit card. Consum-

ers who cannot pay balances in full each month could end up paying much more in interest if they use retail credit cards instead of general purpose cards. · Too many accounts: A 2019 study from the credit reporting agency Experian found that the average American has four credit cards. Though many consumers can effectively manage that many cards,

the more cards an individual has, the easier it can be to lose track of spending. More cards also means a greater potential for more debt, as each card has its own limit that is unrelated to the limits on other cards. · Bonus hunting: Another pitfall to avoid is the temptation to use credit cards instead of cash in an effort to accumulate more travel miles or

cash back bonuses. Consumers should aspire to use cash over credit whenever possible. Doing so ensures consumers are not spending money they don't have, which is one of the most common ways that individuals build significant consumer debt. · Failure to budget: A budget is the most effective way for individuals to gain control of their spending. That lesson seems to resonate more with young people than older men and women. A 2019 poll from Debt.com found that 74 percent of consumers between the ages of 23 and 38 use a budget to govern their spending, while only 67 percent of consumers between the ages of 39 and 54 use a budget. A failure to budget can increase the risk of spending impulsively and make it hard for consumers to see what's coming in and what's going out. That's a recipe for accumulating debt.

Avoiding certain pitfalls can help consumers avoid accumulating debt that can adversely affect their financial futures.