ALBANY – Tax assessors across New York are ripping a new state law that will mean homeowners earning between $250,000 and $500,000 a year will get a check for their STAR rebates rather than receiving an upfront savings directly in their school-tax bills.
The measure was tucked into the state budget last month and is the sixth change to the popular STAR rebate program that offsets a portion of income-eligible homeowners’ property taxes.
The latest change will create confusion and inequities in the $3 billion program, the New York State Assessors Association warned earlier this month.
“We can agree that with each administrative change there has been confusion among the taxpayers and unnecessary chaos in the assessment community,” the group said in lengthy statement.
About 2.6 million New Yorkers receive the STAR benefit each year, but the state has been making a variety of changes to it in recent years — both as an fiscal maneuver and as a way to streamline the program.
What will change?
The latest change won’t impact who is eligible for the program.
Yet it will impact whether homeowners get their STAR rebate as a check each fall or an upfront savings in their bills, which had been the case for everyone until recently.
And there’s another twist. The state wants everyone in the program to switch to a check: So only those who get a check this fall will get a 2 percent increase in their STAR savings.
“The exemption will not receive a greater savings than received in 2018. This is the dangling carrot to encourage the taxpayer to convert to the STAR Credit,” the Assessors Association.
Several years ago, New York started issuing STAR checks for those who bought their homes after Aug. 1, 2015.
Now it will switch to a check this fall for anyone earning between $250,000 and $500,000, which is the maximum income eligibility for the program.
For everyone else who has owned their homes prior to Aug. 1, 2015, and earn less than $250,000 a year, they will still get the STAR savings in their tax bills, unless they decide they want the check.
The change doesn’t impact senior citizens who get Enhanced STAR, which is available to homeowners age 65 and older with incomes of $86,300 or less.
The state has defended the changes, saying it will make the program more efficient and homeowners will receive the checks in time to pay their school taxes, which for most of the state is by Sept. 30.
“By shifting taxpayers to the credit program, the state is able to more efficiently administer the program, strengthen its ability to prevent abuse and separate the STAR savings from the tax bill, making school districts more accountable to taxpayers,” Freeman Klopott, a spokesman for the state Budget Division, said.
Assessors and other critics warned that New York has had trouble in previous years getting all the checks out on time, which could leave homeowners awaiting hundreds if not thousands of dollars when the tax bill comes due.
And if homeowners pay their tax bills through escrow, their banks will likely adjust their monthly payments to account for paying the full tax bill upfront.
“Is the homeowner prepared to pay the full amount anticipating the credit check will arrive on time? Does the homeowner have an escrow account?” the assessors wrote.
“It is important for the homeowner to reach out to the lending institution to ensure their escrow account does not fall short.”
The STAR rebate averages about $800 a year in New York, but more in the New York City suburbs that pay among the highest property taxes in the nation.
“The New York State Assessors Association vehemently opposed these changes to the STAR program,” the group said. “The local assessor was and still is the most knowledgeable entity to administer real property tax exemptions, and STAR was no different.”
Why the change?
When the program started in 1997, schools gave homeowners the STAR savings in their tax bills, and then the schools got reimbursed by the state.
But the state reimbursing the schools showed up on the state’s ledger as an expense.
By issuing checks, the state counts it now as a “personal income tax credit” and it shows up in the state budget as a reduction in tax revenue, not as state spending.
The shift means the state this year could estimate lower its expenses by $238 million.
And since all new home sales come with a STAR check, utlimately all New Yorkers will get a check instead of a savings directly on their tax bill.
“As it is the exemption will diminish over time; there was no need to expedite its extinction,” the assessors continued.
“New York State is creating inequalities amongst those receiving a STAR benefit and is essentially forcing taxpayers to convert to the STAR Credit Check Program.”
What do you have to do?
In order to continue receiving a STAR benefit if you earn between $250,000 and $500,000 or simply want to switch to a check, there is a two-step process.
First, they have to notify their assessor that they are withdrawing from the STAR exemption, which is the upfront tax savings.
Then they have apply for the credit, which is the check.
“Property owners who want to switch to the STAR credit should be aware it is a two-step process,” the assessors association said.
“Follow the instructions for STAR exemption removal and renunciation.”
The group noted that homeowners must file an RP-496, Application to Renounce Previously Granted Exemption(s), with the county director of real property tax services.
Then they have to register with the state Department of Taxation and Finance for the STAR credit check at www.tax.ny.gov/star or by calling 518-457-2036.