The changes made to the STAR Program in this year's budget will create confusion, cause undue hardships for families, and cause some property owners to lose out on the maximum STAR benefit they are owed.
STAR was created in 1997 to reduce school tax bills for local property taxpayers. Essentially, property owners apply to the program to be exempt from paying the full amount of school taxes levied by their local school districts. There are two types of STAR savings, Basic and Enhanced, and both have income requirements. Basic STAR recipients are exempt from paying school taxes on the first $30,000 in home value on their primary residence. Enhanced STAR recipients, those 65 and older, are exempt on the first $65,000 of the full assessed value of the home as long as they earn less than $86,300 a year. The state then pays local school districts the equivalent to the total property tax exemptions.
Under the new law, in order for homeowners to receive the full STAR benefit, they must take a set of actions. First, they have to provide a signed note to their local assessors requesting renunciation of their existing exemption. Second, in order to obtain the STAR check, they have to apply for a personal income tax credit check with the Department of Tax and Finance. Proof of income and other tax forms are required when applying. The STAR recipients would then, in theory, be sent a check equivalent to their STAR savings in the mail. In addition, to be eligible for Basic STAR exemption, homeowners must make less than $250,000 whereas before the exemption was granted for those who earned less than $500,000. Those who make up to $500,000 can still qualify for the tax break but must renounce their exemption and apply for the credit in order to continue receiving it.
There is no set timeline yet for people with incomes under $250,000 to switch from an exemption to a credit but if people do not comply with the change, their STAR exemption benefit will be frozen at the 2019 levels. This latest change follows the move in 2016 when anyone who bought a home in 2016 was forced to apply for a tax credit in order to receive the STAR benefit. The rushed implementation created problems for local assessors and for mortgage companies who had to reconfigure everything for new homeowners after escrow amounts had already been determined. It also resulted in delayed payments, checks being lost in the mail, and others had incorrect amounts issued to them.
Not only are these new changes confusing but they will also hit those on fixed incomes hard, especially some seniors and low income families, because they may not have the funds to pay for their school taxes in full while waiting to receive the tax credit. As a result, some may decide to stay in the exemption program and lose out on future year savings.
Some may ask, since this change is confusing and burdensome, why was it included in the budget. In short, it is a budget gimmick. In order to make the payments to school districts every year, the state has had to appropriate enough funds in the budget. Making this payment became a challenge if the State wanted to keep within its self-imposed 2% state budget spending cap. Because of the change, the state now will have to reimburse the school district less because the property taxpayers are fronting the money which presumably they will later be reimbursed for through a tax credit. The state does not appropriate funds for tax credits, rather it views them simply as less revenue coming into the state. This way, the credits do not count as state spending and therefore won’t affect the 2% spending cap. Plain and simple, it is budget gimmickry.
I will work to share updates as they become available from the Department of Tax and Finance to help reach more people about this change so they do not miss out on the savings. For current STAR information and applications, visit https://www.tax.ny.gov/pit/property/star/default.htm. If you have any questions or comments regarding this or any other state issue, please contact me. My office can be reached by mail at 200 North Second Street, Fulton, New York 13069, by e-mail at [email protected] or by calling (315) 598-5185. You can also friend me, Assemblyman Barclay, on Facebook.