The New York State School Tax Relief Exemption, or STAR, is a property tax break. The program, which was initiated in 1997, provides real estate property tax relief to the state’s residents. The program reduces local property taxes for eligible residents, with the school district reimbursed by New York. Thus, the district’s school funding is unaffected.
It is not a well-understood program. There are two types of STAR: Basic Star and Enhanced STAR. Providing you meet the qualifications, you can receive significant tax savings.
It is a simple concept. The overarching goal is to provide New York State residents with a break on property tax. However, there are income thresholds to exclude the wealthy under the assumption that they do not need the break,
Basic STARBasic STAR
You are eligible for the Basic STAR program on your primary, owner-occupied residence, providing your income when combined with your spouse, which is less than $500,000. If this is the case, the first $30,000 of your home’s value, which includes co-ops and condos, is exempt from tax.
Enhanced STAREnhanced STAR
This is the more generous program, which is designed to provide senior citizens with a tax break. For those residents that are at least 65 years old and incomes that are $86,000 or less this year ($86,300 for 2019), the first $66,800 of your home’s value is exempt from tax.
In New York City unlike many of the state’s other cities, the benefit applies partially to New York City and school taxes. New York City’s Department of Finance assesses your property annually.
There are two residential classes. Class 1 applies to one-to-three family homes, while Class 2 is for co-ops, condos, and rentals with more than four units. For Class 2 properties, the property tax rate is 12.719%, with a school tax rate of 11.869%. It is 20.385% for Class 1 properties (7.426% school tax rate).
Remember to registerRemember to register
Generally, you do not receive the credit automatically. When you are applying for the STAR benefit, you need to register with New York State. The good news is that you only have to do this one time. After that, even if you become a senior citizen and qualify for the Enhanced STAR program, you do not need a new registration.
In order to register, you need to have the property owners’ names and social security numbers, address, approximate date the property was purchased, and a current school tax bill. You will also need the address of any other residential property that you own in the state.
Additionally, the state asks for your federal or state income tax returns. Otherwise, if you did not file a tax return, you need your income information, including wages, interest and dividend income, unemployment compensation, pension income, social security, and other income.
In practiceIn practice
A lump sum amount is paid to the building, and the management company is responsible for making sure you receive the payment. However, it can do this in a variety of ways, including a cash payment, a credit (e.g. to your monthly maintenance), or adding it to the reserve fund.