What is the Basic STAR Property Tax Credit in NYC?

Basic STAR (School Tax Relief) is a tax credit available to owners of houses, co-ops and condos in NYC with annual income of $500,000 or less who use the qualifying property as a primary residence. Estimated annual savings from Basic STAR is ~$300/year. Qualifying recipients receive a STAR check in the mail each year from the New York State Department of Taxation and Finance.

Basic STAR is part of the New York State School Tax Relief Program which was originally implemented by Governor George Pataki as part of his 1997-1998 budget.

It was designed to reduce school district property taxes on the primary residences of New Yorkers.

STAR takes two forms: Basic STAR (which we discuss in this article) and Enhanced STAR, which offers a larger discount for qualifying senior citizens.

A new homeowner becomes eligible for the Basic STAR credit in the first year that the property is owned and it is her or his primary residence as of the date that school taxes are due. For example, if the property is purchased on July 15th and taxes are due on July 30th, the new homeowner is eligible, provided that they register for the credit. If the closing date occurs after the due date for taxes, the new homeowner will become eligible for the STAR credit in the following year.

To apply for Basic STAR, complete the online application here.

Prior to 2016, Basic STAR was an exemption (as opposed to a credit) for qualifying homeowners earning $250k or less. Instead of receiving a check, recipients of the exemption receive a discount directly on their property tax bill.

Here is an example of what the Basic STAR exemption looks like on a NYC property tax bill:

Qualifying homeowners who were receiving the Basic STAR exemption prior to 2016 may continue to receive it for the same primary residence. However, new applicants must apply for the Basic STAR credit as opposed to the exemption.

However, it may be beneficial for current recipients of the Basic STAR exemption to switch over to the credit. This is because the value of the STAR credit savings may increase by as much as 2% each year, but the value of the STAR exemption savings cannot increase.

In addition, if a qualifying homeowner’s income is more than $250k (and $500k or less), they must switch to the Basic STAR credit to continue receiving the STAR benefit.

To qualify for the Basic STAR credit, The property must be owned by the eligible applicant(s). A married couple can receive only one STAR benefit regardless of how many properties they own, unless they are legally separated.

Purchaser(s) in possession of the home under an executory contract of sale (aka land contract) are considered owners(s).

Basic STAR (School Tax Relief) is a tax credit for certain owners of houses, co-ops and condos in NYC. Basic STAR annual savings is ~$300.

Corporations, partnerships, and LLCs are not eligible unless it is a farm dwelling.

Income for STAR purposes means adjusted gross income minus the taxable amount of total distributions from IRAs (individual retirement accounts and individual retirement annuities).

As per the New York State Department of Taxation and Finance, special eligibility rules apply for nursing home residents, trusts and life estates as outlined below:

Nursing home residents

If you own your home, you’re eligible for Basic or Enhanced STAR, as long as no one other than the co-owner or spouse resides there.

Trusts

If you’re a trust beneficiary who conveyed your home to trustees but continues to live in the home, you get the STAR benefit. For example, a senior creates a trust and conveys her home to her children as trustees. If she remains in the home as the beneficiary of the trust, she is considered the homeowner and gets the STAR benefit.

Life estates

Under a life estate, one party has a life tenancy (ownership for the rest of his or her life) and another party—the remainderman—will become the owner after the life tenant dies. While the deed may appear to convey ownership to the remainderman, the remainderman will not take title until the death of the life tenant. Therefore, for exemption purposes, the life tenant is deemed to own the property, and STAR eligibility is based on the life tenant’s qualifications.

If you switch to the STAR credit from the STAR exemption, once your registration takes effect, you’ll receive a check for the STAR credit rather than a reduction on your school tax bill (the STAR exemption).

Once you apply for and begin to successfully receive the Basic STAR credit, you don’t need to reapply in future years unless there is a change in ownership of your home. When applying for Basic STAR, the Department of Taxation and Finance will automatically check whether you qualify for Enhanced STAR.

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