STAR program: Property tax relief for New York homeowners

This article was fact-checked by our editors and CPA Janet Murphy, senior product specialist with Credit Karma.

The median property tax bill in New York is $3,755, meaning half of the state’s property owners pay more. That’s 96% higher than the national median, according to the governor’s office.

Homeowners who are eligible for the state’s STAR program, and who enroll in it, may be able to get help paying their school taxes, which often represent a significant portion of a typical property tax bill.

In response to the coronavirus pandemic, New York Gov. Andrew Cuomo issued an executive order that gave jurisdictions within the state extra time to finalize real property assessments and hear complaints.

Let’s look at how the School Tax Relief program generally works and who qualifies for it.

• How much are New York state property taxes?
• What is the STAR program and how does it help?
• How can I apply for STAR?
• Who’s eligible for STAR property tax relief?
• How much is STAR worth?

How much are New York state property taxes?

Local jurisdictions such as municipalities, counties, school districts and special districts (there are more than 3,700 in the state) set property tax rates in New York.  Total property taxes are often a combination of taxes from multiple jurisdictions.

To calculate your property tax for a given jurisdiction, you’ll generally divide your home’s assessed value by 1,000 and multiply the result by the jurisdiction’s tax rate. According to the Office of the New York State Comptroller, these were the 2019 median tax rates per $1,000 of property value in the state.

• $17.64 for school districts
• $12.13 for cities
• $7.05 for counties
• $6.05 for villages
• $4.59 for towns

Here’s an example of how much a homeowner might pay in a locality with median tax rates for city, county and school taxes.

12.13 (city rate) + 7.05 (county rate) + 17.64 (school district rate) = $36.82 (total property tax rate)

Now apply that to a home with an assessed value of $250,000.

250,000 (assessed value) / 1,000 = 250

250 x 36.82 (total property tax rate) = $9,205 (total property tax bill)

What is the STAR program and how does it help?

School taxes accounted for nearly 63% of total property taxes collected in New York for 2019, according to the Office of the New York State Comptroller. The School Tax Relief, or STAR, program provides New York property tax relief to eligible homeowners.

Through the program, homeowners either get a credit, paid by check, that they can use toward paying their school taxes — or an exemption that directly reduces their school tax bills. But the exemption is only available to homeowners who’ve been receiving it since 2015. If you’re a new homeowner, you can only take your STAR benefit as a credit.

Learn more about property tax relief.

How can I apply for STAR?

To participate in the STAR relief program, homeowners must register for it. If you’ve recently bought a home or never applied for the program before on your current home, you’ll need to register and submit a STAR application.

Here’s what you’ll need to register for 2020 benefits.

• Names and Social Security numbers for everyone who shares ownership in the property.
• Primary residence address for all owners and their spouses.
• The date of the purchase (this can be approximate) and, if you have it, the seller’s name, though that’s not required.
• The most recent school tax bill, if the owners received one.
• The address of any residential property you own in other states.
• Your 2018 federal or state income tax return and returns for any co-owners of the house.
• Wage, salary, tip, investment income, unemployment, retirement income and other income information, but only if you didn’t have to file a 2018 tax return.

Once you’ve registered for the program, and the state has confirmed your eligibility, you don’t need to register again for as long as you continue to own the house.

Who’s eligible for STAR property tax relief?

To be eligible for basic STAR, you must …

• Own your home and live in it as your primary residence.
• For the credit, have 2018 income that was $500,000 or less — or for the exemption, have income of $250,000 or less. If you’re married, your and your spouse’s combined income must be within the limit.

To be eligible for the enhanced version, you must …

• Own your home and live in it as your primary residence.
• Be 65 or older by Dec. 31 of the year in which you’re claiming the enhanced version. Or your spouse, who lives in the residence with you, must meet the age requirement.

Or …

• If you’re a surviving spouse, and you were receiving the enhanced benefit because of your deceased spouse’s age, you can keep receiving it as long as you’re at least 62 by Dec. 31.
• Your 2018 income was $88,050 or less. That limit applies to the combined income of all owners of the property, whether they live there or not, and the owner’s spouse if they reside at the property.

What’s a ‘primary residence?’

The state will consider your home to be your primary residence if it’s the address you use for voting purposes and vehicle registrations. It will take into consideration the amount of time you spend there annually.

Your primary residence can be a house, condo, co-op apartment, manufactured home, farmhouse or the portion of a mixed-use property (such as an apartment building) that you own and occupy.

What’s my income for eligibility?

Income for STAR eligibility starts with your federal adjusted gross income (you can find this on Line 7 of the federal Form 1040 for 2018). If you didn’t have any taxable distributions from an IRA, your federal AGI will serve as your income for determining STAR eligibility.

But if you had retirement account distributions that were subject to income tax, you’ll need to subtract the taxable portion of those distributions from your federal AGI. You’ll find the taxable portion of your IRA distributions on Line 9 of Form IT-201, the New York state tax return for individuals.

 How much is STAR worth?

Whether you receive your STAR benefit as a credit or an exemption (and remember, first-time homeowners can’t get the exemption anymore), the amount of your benefit can change from year to year. Multiple factors will influence the amount, including whether you receive a basic or enhanced benefit, take your benefit as a credit or exemption, school tax rates, property values in your area and local tax assessments.

STAR exemption amounts

If you receive your STAR benefit as an exemption, it will directly reduce your school tax and will be reflected on your property tax bill.

You can determine the amount of your savings by multiplying your basic or enhanced STAR exemption amount by the school tax rate (minus any portion for library tax) divided by 1,000. That said, each municipality has a maximum savings amount, and that’s the most you can receive, even if your calculated benefit is more. You can look up maximum exemption amounts here.

STAR credit amounts

If you’re eligible for STAR benefits as a credit, you get a check from the state every year for the credit amount. You can use that check to help pay your school property taxes. If you’ve received the STAR exemption in the past, you can choose to switch to the credit. Homeowners with income of $250,000 or more must switch. And the state says you may receive a larger benefit by switching.

While STAR exemption savings can’t increase, STAR credit amounts may grow as much as 2% each year. For 2020, the credit amount could exceed exemption savings by as much as 4.04%, according to the state’s website. But your credit amount will never be less than the STAR exemption benefit for your locality.

What’s next

Property taxes in New York state may be higher than taxes in other states. But the STAR program aims to relieve a bit of the pressure by providing a break on school taxes — often the largest portion of a New York property tax bill.

You may have to do some calculations to understand how much your benefit will be, and you’ll have to take the credit if you’re a new homeowner. But eligibility requirements should be fairly easy to meet, especially for the basic STAR benefit, which has a generous income limit of $500,000.

Relevant sources: Office of the New York State Comptroller: Property Taxes in New York State | New York State Department of Taxation and Finance (NYDTF) STAR resource center | New York State: Reforming Government | New York State Executive Order 202.22 |  NYDTF: How property taxes are calculated |  NYDTF: Types of STAR |  NYDTF: Register for the STAR credit | NYDTF: STAR eligibility | NYDTF: Why switch to the STAR credit from the STAR exemption | NYDTF: Maximum 202-2021 STAR exemption savings | NYDTF: About the STAR credit program

A senior product specialist with Credit Karma, Janet Murphy is a CPA with more than a decade in the tax industry. She’s worked as a tax analyst, tax product development manager and tax accountant. She has accounting degrees and certifications from Clemson University and the U.S. Career Institute. You can find her on LinkedIn.