We wanted to let you know of a major change to the New York State School Tax Relief Exemption, also known as “STAR,” that will be taking effect under the New York State 2013-14 budget.  

To summarize what we have below, here’s what you need to know:

·      Starting with the 2014-15 tax year, homeowners will have to file every year for the STAR exemption.

·      If you already have the STAR exemption, you don’t have to do anything right now to get the exemption for the 2013-14 tax year, but you will need to file a new application by April 1, 2014 for the 2014-15 tax year, and every year thereafter.

·      If you’re unfamiliar with STAR, the post below explains the basic contours of the STAR program, the benefits of STAR, and how to apply for it. 

At the end of this post, you’ll also see links to the New York State primary sources where you can download the application form and get more information.

What is STAR

The STAR program is a rebate to your school taxes that applies to most New York State homeowners that meet certain income eligibility restrictions, and can be claimed by filing a very simple form that you can complete in about ten minutes. New York provides for two types of STAR exemptions: the “Basic STAR” and the “Enhanced STAR.”  The main difference is that basic STAR applies to all homeowners regardless of age, while the Enhanced STAR applies only to homeowners who are 65 years of age or older.  Enhanced STAR has more restrictive income restrictions, but does provide a somewhat larger tax rebate for eligible homeowners.

Essentially, what STAR does is exempt part of the value of your home from the calculation of your school tax assessment, thereby reducing the taxes that you’ll have to pay.  So, for example, if your home is assessed at $300,000 and you get an exemption for $30,000, then your property tax burden will be calculated on a revised assessment of $270,000.  The lower your assessment, the lower your tax burden, so the exemption will probably save you a few hundred dollars or so every year.  The exemption varies by municipality, but is generally around $30,000 or so.  (You can check your municipality’s exemptions online at the link provided on the links section on this page.)

What’s the New Rule?

The key change is simple: from now on, homeowners will have to file a new application EVERY year in order to claim the exemption.  Under prior law, you could file the application for basic STAR once, and claim the exemption every year.  Now, Basic STAR will be treated like the Enhanced STAR, requiring homeowners to file an application every year by April 1 in order to claim the exemption for the upcoming tax year. 

Why the change?  Essentially, what happened is that an audit of the program showed that many people have been abusing the system, receiving improper tax benefits for second homes and rental properties.  For example, just in Rockland County, an investigation by DA Tom Zugibe revealed that more than 500 property owners were illegally getting the rebates, claiming $671,000 in revenue.  As the Journal News reported:

“Our figures represent the tip of the iceberg,” District Attorney Thomas Zugibe said. “Those who double-dip STAR exemptions are cheating the system, at a time when the state’s finite resources are of critical importance.”

Zugibe and several town officials said Rockland is the only county so far tracking STAR fraud, extrapolating that fraud is much more than the initial discovery of 516 property owners, including 75 people who live outside the state and country.

Gov. Andrew Cuomo has proposed an anti-fraud program that will allow for statewide registration for STAR based on income-tax returns and for the Department of Taxation and Finance to oversee the program in conjunction with the efforts of local tax assessors. The office has projected $50 million in savings.

Luckily, filing for the STAR exemption is pretty simple, so read on.

Who is Eligible?

The STAR exemption applies to any type of home, whether it’s a condo, coop, manufactured home, farmhouse, apartment building or mixed-use property, so long as the home is owner-occupied.  Both Basic STAR and Enhanced STAR, though, have income eligibility requirements. Basic STAR restricts the exemption to homeowners that earned no more than $500,000 on their most recent federal tax return, including the income for all owners and spouses who live in the home.  For Enhanced STAR, all homeowners and spouses cannot earn more than $79,050. 

In most cases, you’ll just state your income when you file your STAR application, but your local assessor does have the authority to require you to prove your income eligibility by providing a copy of your federal or state income tax return.  Note that the STAR income restrictions are based on your most recent tax return, not the most recent tax year, which in practice means that your eligibility depends on your income two years ago, not last year. So, for example, when you apply for your STAR exemption for your 2013 school taxes, you’ll base your eligibility on your 2011 tax return that you filed in 2012.

How do you apply?

The STAR exemption does not run with the property, so you don’t automatically get the rebate if you buy a home that already had the exemption.  But getting the exemption is a routine matter. If you are income-eligible for the STAR exemption, you simply need to file an application with the state and the rebate will apply toward your school taxes for the next tax year. The application is called “RP-425: Application for School Tax Relief (STAR) Exemption) and is very short and straightforward – it simply asks you to identify your property address, answer a few questions about your income eligibility, and sign the form.  You can get your application from your Better Homes and Gardens Rand Realty agent, from your local tax assessor’s office, or at the links section on this page.

You should file your application as soon as you close on your new home. Depending on when you close, though, you might not be eligible for the exemption right away.  School taxes are generally assessed in the fall of the year, so you will only start getting the exemption if you file your application by the spring of that tax year.  In most municipalities, the applications must be postmarked or received in the assessor’s office by the “Taxable Status Date,” which is usually March 1.  That date can vary by town or village, though, so you should check with your local assessor’s office to get the local deadline. 

Because of the change in the law starting in 2013, you will need to file for your STAR exemption every year by April 1 for the upcoming tax year.  For people who do not yet have STAR, you should file the application as soon as possible.  Depending on your jurisdiction, you might still be eligible to claim the exemption for the upcoming tax year. If you already receive STAR, it looks like you will still get your exemption for the 2013-14 tax year, and do not need to file a new application until April 1, 2014 to claim the exemption for the 2014-15 tax year.  

Links

Here are some links that you might find helpful in applying for the STAR Exemption.  Please note that the state website often shuffles its pages, so if these links do not work just try Googling “New York State Department of Taxation and Finance STAR Exemption” and you’ll find the general information page. 

To get to the Department of Taxation and Finance Information Page

http://www.tax.ny.gov/pit/property/star/index.htm

To get the RP-425 Application for the STAR Exemption

http://www.tax.ny.gov/pdf/current_forms/orpts/rp425_fill_in.pdf

To check your municipality’s exemptions:

http://www.tax.ny.gov/pit/property/star/ex_index.htm

To get phone help, you can call the Tax Department at 1-877-6-STAR-NY (1-877-678-2769)

Conclusion

We hope you find this helpful.  If you have any questions, or we can be of any further service, contact your Better Homes and Gardens Rand Realty agent, or contact me directly if you need to be set up with a great agent.