What Are Star Tax Exemptions and How Do They Work?
Updated: Jul 7
New York State STAR Tax Exemptions
The New York State School Tax Relief is a state-financed tax exemption program authorized under section four hundred and twenty-five of the Real Property Tax Law of the United States. The program is commonly referred to as New York State STAR. The STAR program was first introduced in the school year 1998 to 1999. It is aimed at providing property tax reliefs to owner-occupied primary residences in school districts. The New York STAR tax exemption only applies to property taxes in school districts. Property taxes for other purposes such as the county, city, or town are exempted from the STAR program.
How do I know if my property is a primary residence? A primary residence is determined by factors such as length of time spent on the property annually, voting, vehicle registration, etc. While assessing your property for the STAR program application, you will be required to produce proof of residency. In cases where the property serves other users other than residential purposes, only mixed-used properties can be eligible for the STAR program. However, it must be the owner’s primary residence. It is also important to note that only your primary residence will be subjected to the STAR tax exemption if you own more than one residence.
Primary residences considered for the STAR program must be:
A cooperative apartment
Manufactured home or
Mixed-use property. Only the portion used as the primary residence qualifies for the STAR benefits.
Income considered for the STAR program is the federal adjusted gross income less the taxable amount of distributions from annuities, royalties, or individual retirement benefits. There are two types of STAR tax exemptions; primary STAR and enhanced STAR.
Basic STAR is available to all primary residences owner-occupiers. There is no age limit for resident homeowners and their spouses or registered resident partners who apply to receive the basic STAR benefits. The approximate benefit earned by basic STAR beneficiaries is a two hundred and three tax relief for the full value of their property. They will be liable for a twenty-seven percent annual tax reduction for basic STAR beneficiaries living in median-priced primary residences.
Unlike the basic,
Enhanced STAR is only available to primary residence owner-occupiers who have attained sixty-five years or above. However, senior citizens who have achieved sixty-five years of age but whose income exceeds the recommended ninety thousand five hundred and fifty dollars annually will be considered for the primary STAR benefits. The approximate benefit earned by enhanced STAR beneficiaries is a six hundred and fifty tax relief for the total value of their property. They will be liable for at least a forty-five percent annual tax reduction for senior homeowners living in median-priced primary residences. Since the adjustment of laws, the enhanced STAR program is no longer available for new homeowners in New York State.
STAR Program Eligibility Requirements
Basic STAR eligibility requirements
The combined income of all homeowners who live in their house and the spouse must amount to five hundred thousand dollars or less.
Homeowners who received the STAR benefits from 2015 to 2016 but lost them can reapply. The income of those who reapply to restore their STAR benefits must amount to two hundred and fifty thousand dollars or less.
Enhanced STAR eligibility requirements
Senior citizens who have attained sixty-five years in New York State are eligible for tax relief for their primary residences. For matrimonial properties that serve as the applicant’s primary residence, only one, either husband or wife, must have attained sixty-five years during the year of application. For widowed spouses who wish to retain the star benefits, they must have attained sixty-two years of age; otherwise, they must switch to the basic STAR program.
The annual income must amount to ninety thousand five hundred and fifty dollars or less to qualify for the program. However, the annual income was adjusted from sixty thousand dollars from 1998 to 1999 and eighty-eight thousand five hundred and fifty dollars from the year 2020. For matrimonial properties owned by a husband and wife, their combined income must not exceed ninety thousand five hundred and fifty dollars.
The subject property receiving the STAR benefits must be the primary residence of at least one owner. Married couples applying to receive the STAR benefits can only receive tax exemptions on the primary residence. However, if they are divorced or legally separated, they can present supporting documents to the New York State Department of Taxation and Finance.
Properties that qualify as owner-occupier primary residences under the STAR program are listed as 421a beneficiaries who are not eligible for the STAR benefits.
How to Apply for the STAR Benefits
To apply for the STAR benefits, you must fill the RP-425 form. The application form is available from local assessor’s offices or online from the New York State Department of Taxation and Finance website. Applicants forward their applications to the New York State Department of Taxation and Finance. When applying for the New York State STAR benefits, it is essential to present the proper documents. Your documents not only support your claim but also show whether the program is right for you.
To table your application for the STAR program, you can apply either by mail, phone, or online. The online application takes a few minutes and is automatically reviewed to prove whether you are eligible for either basic or enhanced STAR. Applicants who want to be considered for the enhanced STAR benefits can download the New York State Department of Taxation and Finance application and send it through the mail. They can also apply by filling the STAR to ESTAR application form. In case one wants to restore their essential STAR benefits, they must fill the STAR benefit restoration application form.
The required documents are categorized into two; documents proving who you are and documents proving your income.
To prove who you are, you must present either of the following documents:
An original or certified copy of your birth certificate
Driver’s license or an official photo Identification
To prove the income source of each income earner applying for the STAR program, you must present any one of the following documents:
Income earners earning wages and salaries must prove their income with an income tax return or a W-2 form.
Income earners earning unemployment income must present the 1099-G form as proof of income.
Homeowners liable for social security benefits such as disability, retirement, survivor's, SSI, or retirement benefits prove their income either; a current benefit check, a current letter of award or certificate, or correspondence from the Social Security Administration office.
For pensions, annuities, or IRA, primary residence homeowners must present the 1099-R form.
For interest, dividends, or royalties, you must present either 1099-DIV or 1099-INT forms.
In addition to the proof of income and proof of age, applicants must present a copy of both federal and state tax returns from two years before applying for STAR tax exemptions.
Senior citizens eligible for the STAR benefits but have bought a new primary residence must note that the STAR benefits are not automatically transferrable. He or she must fill a new RP-425 form to apply for the STAR tax exemption for the new primary residence.
How does the STAR Program Work
The STAR program aims to provide New York State homeowners with tax relief for their primary residence. It lowers the property tax burden for homeowners whose primary residences are located in school districts.
The New York State Department of Taxation and Finance presents STAR benefits in two basic forms. You can either receive a property tax reduction on your primary residence or a check for the amount of your STAR savings under the STAR credit program. New York State Department of Taxation and Finance sends the check to your mail annually to pay your district school property taxes. Basic STAR beneficiaries earning between two hundred thousand dollars and five hundred thousand dollars receive checks from the New York State. Beneficiaries earning less than two hundred and fifty thousand dollars can also apply for the STAR credit program, where they receive checks instead of reducing their school district property taxes.
Other rules under the STAR program include:
Home residents in nursing homes.
If you own a home but are admitted to a nursing home, you will be eligible to basic or enhanced STAR program provided only your co-owner, probably a sibling or spouse resides in the house.
STAR program applicants who receive trust benefits and have conveyed their primary residences to trustees can still receive the STAR benefits.
Applicants who fill false applications will be penalized for material misstatement. Penalties for misrepresentation of your primary residence, age, or annual income may either be:
An acceptable worth one thousand dollars
a prohibition from receiving the STAR benefits for not less than five years
Offenders may return tax savings of up to three years
Offenders may also be prosecuted for criminal offenses
Our team has specialized in all matters of real estate, including law, technology, advertising, interior design, photography, cinematography, and civil service. Contact us for more information.