Tax-Time Tip: Wishing on a STAR

It wasn’t always so expansive; the first version, enacted in 1997, applied only to senior citizens. But starting in 1999-2000, an additional tier began applying to all ages. And in March 2007, then-governor Eliot Spitzer signed legislation creating a new sub-tier version aimed solely at middle-class homeowners.

STAR was designed to reduce homeowners’ annual property taxes — the traditional way of funding the public schools— by exempting the first $30,000 of a primary residence’s assessed value.

It works by having the state pay school districts a certain amount of money each year from a set-aside portion of the state’s personal income-tax revenue. The state then reduces homeowners’ property taxes by an offsetting amount. So, let’s say the state pays a school district $100,000 from this fund, and 1,000 homeowners live in that district. Each homeowner’s annual property tax bill would be reduced by $100. And last year, the state began sending homeowners an additional rebate check, usually totaling anywhere from $200 to over $1,000.

The two longstanding versions of STAR are:

• Basic STAR ...

...available to owners of one- to three-family houses, condo owners, and co-op shareholders. There is no income or age limit, but units held by sponsors or their successors aren’t eligible.

• Enhanced STAR ...

... an additional rebate for homeowners aged 65 or over as of December 31 of the exemption year, with a household income of $70,650 or less. In New York City, the fiscal exemption-year runs from July 1 to the following June 30.

New STAR on the Horizon

The newly enacted Middle-Class STAR gives a separate rebate based on a sliding scale of income. For upstate homeowners, the amount of the rebate begins shrinking as annual income exceeds $90,000. For the New York City metropolitan region, where the cost of living is higher, that figure is $120,000. Homeowners with incomes of $250,000 or more get no Middle-Class STAR rebate, though they can still get Basic STAR.

[UPDATE: A New York State Dept. of Taxation and Finance representative in December 2013 was unfamiliar with this third option. The department's website mentions a sliding scale for Enhanced STAR only, saying, "Each taxing authority has the option of whether or not to offer the exemption, the maximum income level, and whether or not to offer a sliding scale option for incomes over the maximum. Contact your Assessor to determine what has been adopted in your municipality.]

Note: The STAR abatement goes with the unit, so if you moved, it applies to the next owner. STAR also applies to primary residences only, so if you're subletting your co-op and living and voting in Florida, you can’t claim the rebate.

For first-time applicants, the co-op or condo board or its managing agent is required to do the filing, rather than you. The filing deadline is February 15 for each upcoming fiscal year, with property ownership information accurate as of the preceding January 5. Since New York City’s fiscal year runs July 1 through June 30, this means that for the 2009 fiscal year, which runs July 1, 2008, to June 30, 2009, your board or the managing agent filed applications by February 15, 2008, reflecting property ownership as of January 5, 2008.

It’s simpler than it sounds. As Jennifer Christman of Wentworth Property Management, the managing agent of the six-building, 348-unit Nostrand Gardens co-op in Sheepshead Bay, Brooklyn, describes the process: “I give the [exemption and abatement] applications to the shareholders, and they fill them out and send it in themselves. If the shareholders get the form from the city, they bring it to my office and I fill out the management company portion. It takes two minutes.”

How it Works

For co-ops, once the city processes the applications, the Department of Finance sends the management company a list of names and addresses for each co-op unit and the rebate amount to which each is entitled. The corporation’s property tax bill is reduced by the total of amount of these rebates, and the corporation pays each shareholder.

Now, with other forms of tax abatements, most co-ops will assess you a per-share fee equal to the amount of the rebate. It's a relatively painless way for buildings to raise needed revenue: You'll see neither the reduction nor the assessment on your monthly maintenance bill since they cancel each other out.

However, you can’t do that equitably with STAR, since Basic STAR gives a $30,000 exemption on a home’s assessed value, and Enhanced STAR gives eligible seniors a $56,800 exemption. Simple mathematics tells you this means shareholders getting the lower exemption wind up paying a bigger per-share assessment than shareholders getting the larger exemption.

Condo owners, by the way, are treated the same as house owners, and get rebate checks and tax credits directly.

Finally, a small, additional STAR benefit goes directly to taxpayers as a form of credit on your New York City Personal Income Tax (PIT) filing. Married individuals filing joint returns get a $290 credit, and individuals get a $145 credit, subject to a $250,000 income cap. This relatively small addition carries the acronym STAR PIT.

Adapted from Habitat September 2007. For the complete article and more, join our Archive >>