6 Tax Credits New York Residents Should Know About

During that dreary time of year while we wait for spring, it's a good thing we have tax season to keep us from our melancholy. But seriously, folks, it's that time again. Rather than approach my taxes with dread, however, I like to think of it a bit like the Easter egg hunts to come: How many tax breaks can I dig up this year?

While there are a lot of great federal tax credits to uncover, don't forget your state may also have some gems. New York State residents, for instance, may want to explore some of these potentially lucrative tax credits.

1. Empire State Child Credit

The Empire State Child Credit is a refundable tax credit for eligible New York State residents who qualify for the Federal Child Tax Credit. Previously, eligible children needed to be over age 4 but under 17. As of 2023, children under 4 can also qualify.

You're eligible for the Empire State Child Credit if you were a full-year New York State resident (or were married to one), have a qualifying child, and you have a federal child tax credit (or qualify for one via income). The amount of the state credit varies based on whether you claimed the federal credit.

Refundable: Yes.

2. Child and dependent care credit

This is the New York State version of the federal credit. The Federal Child and Dependent Care Tax Credit is for working people who pay for child or dependent care. If you're eligible for the federal credit, you can claim the state credit. The amount of the credit will vary based on your income and expenses.

Refundable: Fully refundable for full-time state residents, partially refundable for part-time residents, nonrefundable for nonresidents.

3. Earned income credit

Another federal-to-state credit, the New York State earned income credit is open to folks who qualify for and claim the Federal Earned Income Tax Credit. This program is designed for low-income singles and moderate-income families (the 2023 eligibility table maxes at $17,640 for a single filer, and $46,560 for a single filer with one child).

Refundable: Fully refundable for full-time state residents, partially refundable for part-time residents, nonrefundable for nonresidents.

4. Clean heating fuel credit

There are a variety of federal state credits you can claim for using or upgrading to certain "clean" energy sources. The New York State clean heating fuel credit is specifically for people (or businesses) who purchase bioheating fuel used for space or water heating for residential purposes.

For the purposes of this credit, bioheating fuel is defined as "fuel comprised of biodiesel or renewable hydrocarbon diesel blended with conventional home heating oil, which meets the specifications of the ASTM International designation D396 or D975." The bioheating fuel must contain at least 6% biodiesel per gallon to qualify, though "fuel that is comprised of renewable hydrocarbon diesel blended with conventional home heating oil may also qualify."

Refundable: Yes.

5. Solar Energy System Equipment Credit

The push for solar is real, both federally and at the state level. The New York State Solar Energy System Equipment Credit is aimed at folks who have purchased or leased solar energy system equipment, or who have a written agreement to specifically purchase power generated by a solar energy system they do not own.

Specifically, the system must be used to produce energy for "heating, cooling, hot water, or electricity for residential use" in a residence within New York State. The credit can be worth up to 25% of your qualified expenditures, up to $5,000.

Refundable: Not refundable, but credit in excess of taxes due can be rolled over for up to five years.

6. STAR credit

The School Tax Relief (STAR) credit is designed to provide property tax relief to eligible New York State homeowners. Effectively, if you're eligible for the credit, the state will send you a check once a year that you can use to pay your school taxes. (As of 2023, you can also choose to receive the credit via direct deposit instead of check.)

Previously, this was known as the STAR exemption, which simply reduced your school tax bill. Folks who already receive the STAR exemption can continue to receive it, but new homeowners will get the credit instead.

Unlike the other credits on this list, the STAR credit isn't an income tax credit. You only need to sign up once, then you will be automatically sent a credit each year you are eligible.

The beauty of tax credits

One of the best things about all of these credits is just that: They're credits. Unlike deductions, which only reduce how much of your income is subject to tax, credits come right off of your final tax bill.

Even better, some income tax credits are refundable. In that case, you can not only reduce your tax bill to zero, you could potentially come away with a refund thanks to refundable tax credits.

That's one of the many reasons it's important to know all of the potential tax breaks you could qualify for before you file. If you're at all worried you might be missing out, look for a reputable tax software to help you, or go analog and hire an actual accountant. Meeting face-to-face (or even screen-to-screen) with a professional can be a great way to get a deep dive into your finances. Happy filing!