STAR Property Tax Credit: Make Sure You Know The New Income Limits

NewsroomTax Strategies
Written By gbfadmin

The STAR Credit is a great way to reduce your property taxes in New York.  If you are over the age of 65, it gets even better with the Enhanced STAR Credit.  But you have to know the income limits associated with the credit otherwise you could unexpectedly lose the credit which could cost you thousands of dollars in additional property taxes.  They made some big changes to the credit that a lot of homeowners are not aware of. In this article we will review: 

  • The income limits for the STAR Credit

  • Eligibility requirements for the Enhanced STAR Credit

  • How much money the STAR credit saves you

  • The most common mistakes that people make that disqualify them from the credit

  • The changes that were made to the property tax credit

STAR Property Tax Exemption

Let’s start with the basics. STAR stands for School Tax Relief.  It’s a partial exemption from school taxes for your primary residence.  There are two different STAR programs: 

Basic STAR

Enhanced STAR 

You Have To Apply For The Credit

You have to apply for the credit to receive it. It’s not automatic. Also, if you turn 65 this year and you want to further reduce your property taxes, there is a special application process for the Enhanced STAR Credit which requires you to enroll in the annual Income Verification Program (IVP).  We will cover this in more detail later on in the article. 

How Does The STAR Credit Work

The STAR credit exempts a specified dollar amount from the assessed value of your house prior to the calculation of your school tax bill.  Here are the current exemption amounts: 

Basic STAR:           $30,000

Enhanced STAR:  $65,000 

The actual dollar amount that you save in school taxes will vary based on where you live in New York State.  But if you live in a $300,000 house, you qualify for Basic STAR, and your school taxes before the STAR’s credit are $7,000.  It could save you around $700 per year in school taxes. If you qualify for the enhanced STAR, you can more than double that savings number.  In a high property tax state like New York, every little bit helps. 

Income Limits For The STAR Credit

Here is a table from NYS Department of Taxation and Finance that summarizes the eligibility requirements for the Basic STAR and Enhanced STAR credit: 

Requirement #1: It must be your primary residence. The credit does not apply for rental properties or second homes.

Requirement #2:  To qualify for the Enhanced STAR, one of the homeowners must be age 65

Requirement #3: The income limitations.  We see fewer issues with the Basic STAR since the income limit is $500,000.  We see a lot more issues with the Enhanced STAR credit with the income limit at $86,300.  Mainly because when you add up social security, pension payments, and required minimum distributions from IRA’s, you have homeowners that flirt with that income limit on a year by year basis. Crossing the income line would drop you back into the Basic STAR program which will most likely result in an unfriendly property tax surprise.

Income Calculation

The eligibility for the 2019 STAR credit is actually based on your income from 2017.  You can reference your 2017 federal and state tax returns against the table listed below: 

Enhanced STAR Credit

Once you or your spouse turn age 65, you are then eligible to apply for the Enhanced STAR program.

Unlike the basic STAR program, the Enhanced STAR program required homeowners to file renewal applications with their local assessor each year to remain in the program. Under the new rules, new applicants are required to enroll in the Enhanced STAR Income Verification Process.

The application deadline is typically March 1st if you are filing at the county level but it can vary from county to county.   You should contact your assessor to verify the application deadline in your area.  The good news about enrolling in the Enhance STAR Income Verification Program is you only have to do it once.  Once enrolled you will receive the Enhanced STAR credit each year as long as your income is below the required threshold.

Common Mistakes With The Enhanced STAR Credit

Since the income threshold for the Enhanced STAR program is much lower than the Basic STAR program this is where we see homeowners get into trouble.  For most retirees, their income is relatively the same from year to year. However, there are frequently one-time events that occur that can push a retiree’s income higher for a given year.  Not only do they end up with a large tax bill when they file their taxes but they also find out that they lost the Enhanced STAR Credit for that year. Double ouch!! 

Here are the most common income events that retirees have to watch out for: 

  • Capital gains and dividends from taxable investment accounts

  • Taking larger distributions from IRA’s or pre-tax retirement plans

  • Age 70 ½ - Required minimum distributions start from IRA’s

  • Receive an inheritance (some sources can be taxable)

  • Sell real estate or land other than the primary residence

  • Surrendering a life insurance policy

  • Part-time income

  • The year you turn on social security benefits

If you experience financial events that are expected to increase your taxable income for a given year, you should work closely with you financial advisor or accountant during those years because there may be ways to reduce your income to maintain the Enhanced STAR credit with some advanced planning. 

Changes To The STAR Credit

New York made some significant changes to both the Basic STAR and the Enhanced STAR credit that not many homeowners are aware of.  The amount of the credit did not change but the methods for applying for and receiving the credit did change.

If you were receiving the Basic STAR credit before and you have not moved since 2016, there is nothing that you have to do.  Everything will continue to operate the same.  However, if you move or if you are new homeowner, the STAR process will be different.  Under the old method, you would simply see a deduction for your STAR credit on your school tax bill.   Going forward, when you buy a new house, you will have to pay your full school tax bill, and then New York will mail you a physical check for your STAR credit.  In order to receive your check in September, you must register for the Basic STAR program through the state Department of Taxation and Finance by July 1st.

After July 1st, you can still apply for the STAR credit, and the state will provide you with a check, but you may receive the check after September.   The same manual check process is applicable with the Enhanced STAR program as well.

If you were receiving the Enhanced STAR and you have not moved, New York is allowing those homeowners to continue to file their renewal applications with their local assessor each year without having to enroll in the new Enhanced STAR Income Verification Program.  However, if you move, you will have to enroll in the Income Verification Program in order to remain in the Enhanced STAR Program.

Michael Ruger

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Related Posts
2023 RMDs Waived for Non-spouse Beneficiaries Subject To The 10-Year Rule
2023 RMDs Waived for Non-spouse Beneficiaries Subject To The 10-Year Rule

There has been a lot of confusion surrounding the required minimum distribution (RMD) rules for non-spouse, beneficiaries that inherited IRAs and 401(k) accounts subject to the new 10 Year Rule. This has left many non-spouse beneficiaries questioning whether or not they are required to take an RMD from their inherited retirement account prior to December 31, 2023. Here is the timeline of events leading up to that answer

Requesting FICA Tax Refunds For W2 Employees With Multiple Employers
Requesting FICA Tax Refunds For W2 Employees With Multiple Employers

If you are a W2 employee who makes over $160,200 per year and you have multiple employers or you switched jobs during the year, or you have both a W2 job and a self-employment gig, your employer(s) may be withholding too much FICA tax from your wages and you may be due a refund of those FICA tax overpayments. Requesting a FICA tax refund requires action on your part and an understanding of how the FICA tax is calculated.

Top 10 Things To Know About Filing A Tax Extension
Top 10 Things To Know About Filing A Tax Extension

Are you considering filing for a tax extension? It can be a great way to give yourself more time to organize your financial documents and ensure that the information on your return is accurate. But before you file the extension, here are a few things you should know.

The New PTET Tax Deduction for Business Owners
The New PTET Tax Deduction for Business Owners

The PTET (pass-through entity tax) is a deduction that allows business owners to get around the $10,000 SALT cap that was put in place back in 2017. The PTET allows the business entity to pay the state tax liability on behalf of the business owner and then take a deduction for that expense.

401(K) Cash Distributions: Understanding The Taxes & Penalties
401(K) Cash Distributions: Understanding The Taxes & Penalties

When an employee unexpectedly loses their job and needs access to cash to continue to pay their bills, it’s not uncommon for them to elect a cash distribution from their 401(K) account. Still, they may regret that decision when the tax bill shows up the following year and then they owe thousands of dollars to the IRS in taxes and penalties that they don’t have.

$7,500 EV Tax Credit: Use It or Lose It
$7,500 EV Tax Credit: Use It or Lose It

Claiming the $7,500 tax credit for buying an EV (electric vehicle) or hybrid vehicle may not be as easy as you think. First, it’s a “use it or lose it credit” meaning if you do not have a federal tax liability of at least $7,500 in the year that you buy your electric vehicle, you cannot claim the full $7,500 credit and it does not carryforward to future tax years.

Can You Contribute To An IRA & 401(k) In The Same Year?
Can You Contribute To An IRA & 401(k) In The Same Year?

There are income limits that can prevent you from taking a tax deduction for contributions to a Traditional IRA if you or your spouse are covered by a 401(k) but even if you can’t deduct the contribution to the IRA, there are tax strategies that you should consider

Kiddie Tax & Other Pitfalls When Gifting Assets To Your Kids
Kiddie Tax & Other Pitfalls When Gifting Assets To Your Kids

Before you gift assets to your children make sure you fully understand the Kiddie Tax rule and other pitfalls associated with making gift to your children……….

How To Pay 0% Tax On Capital Gains Income
How To Pay 0% Tax On Capital Gains Income

When you sell a stock, mutual fund, investment property, or a business, if you have made money on that investment, the IRS is kindly waiting for a piece of that gain in the form of capital gains tax. Capital gains are taxed differently than the ordinary income that you received via your paycheck or pass-through income from your business. Unlike ordinary

Roth Conversions In Retirement
Roth Conversions In Retirement
Paying Tax On Inheritance?
Paying Tax On Inheritance?
Retirement Account Withdrawal Strategies
Retirement Account Withdrawal Strategies

The order in which you take distributions from your retirement accounts absolutely matters in retirement. If you don’t have a formal withdraw strategy it could end up costing you in more ways than one. Click to read more on how this can effect you.

Estimated Tax Payments Still Due April 15th
Estimated Tax Payments Still Due April 15th

The IRS extended the tax filing deadline for 2020 from April 15th to May 15th. Click to read more on the questions that we are getting from business owners, retirees, and individuals taxpayers.

COVID-19 Distribution Tax Forms!!!
COVID-19 Distribution Tax Forms!!!

If you took a COVID distribution from a retirement account, IRA, 401(K), in 2020, you will have to report it on your taxes. Here are the special tax forms that you will need to report your COVID distribution. DISCLOSURE: This is for…

At What Age Does A Child Have To File A Tax Return?
At What Age Does A Child Have To File A Tax Return?

When your children begin working and they receive their first W2, the question from parents is often “Do they have to file a tax return?” In this video we will cover

Will Moving From New York to Florida In Retirement Save You Taxes?
Will Moving From New York to Florida In Retirement Save You Taxes?

I am getting the question much more frequently from clients - "When I retire, does it make sense from a tax standpoint to change my residency from New York to Florida?". When I explain how the taxes work

When You Make Cash Gifts To Your Children, Who Pays The Tax?
When You Make Cash Gifts To Your Children, Who Pays The Tax?

A very common question that we frequently receive from clients is “If I want to make a cash gift to my kids, do I have to pay gift taxes?” The answer to that question depends on number of items such as: The amount of the gift

Do I Have to Pay Tax When I Sell My House?
Do I Have to Pay Tax When I Sell My House?

When you sell your primary residence, and meet certain requirements, you may be able to exclude all or a portion of your capital gain in the property from taxes. In this article, I am going to cover the $250,000

Coronavirus RMD Relief: Ability To Waive Mandatory IRA Distributions In 2020
Coronavirus RMD Relief: Ability To Waive Mandatory IRA Distributions In 2020

Congress passed the CARES Act in March 2020 which provides individuals with IRA, 401(k), and other employer sponsored retirement accounts, the option to waive their required minimum distribution (RMD) for the 2020 tax year.

$5,000 Penalty Free Distribution From An IRA or 401(k) After The Birth Of A Child or Adoption
$5,000 Penalty Free Distribution From An IRA or 401(k) After The Birth Of A Child or Adoption

New parents have even more to be excited about in 2020. On December 19, 2019, Congress passed the SECURE Act, which now allows parents to withdraw up to $5,000 out of their IRA’s or 401(k) plans following the birth of their child

Understanding Required Minimum Distributions & Advanced Tax Strategies For RMD's
Understanding Required Minimum Distributions & Advanced Tax Strategies For RMD's

A required minimum distribution (RMD) is the amount that the IRS requires you to take out of your retirement account each year when you hit a certain age or when you inherit a retirement account from someone else. It’s important to plan tax-wise for these distributions because they can substantially increase your tax liability in a given year;

Do I Have To Pay Tax On A House That I Inherited?
Do I Have To Pay Tax On A House That I Inherited?

The tax rules are different depending on the type of assets that you inherit. If you inherit a house, you may or may not have a tax liability when you go to sell it. This will largely depend on whose name was on the deed when the house was passed to you. There are also special exceptions that come into play if the house is owned by a trust, or if it was gifted

STAR Property Tax Credit: Make Sure You Know The New Income Limits
STAR Property Tax Credit: Make Sure You Know The New Income Limits

The STAR Credit is a great way to reduce your property taxes in New York. If you are over the age of 65, it gets even better with the Enhanced STAR Credit. But you have to know the income limits associated with the credit otherwise you could unexpectedly lose the credit which could cost you thousands of dollars in additional property taxes. They

Why Do You Owe More In Taxes This Year?
Why Do You Owe More In Taxes This Year?

“I thought there was a tax break. Last year I got a refund. This year, I owe money to the IRS. How did this happen and what do I need to change to fix this?.” As more and more people file their taxes for 2018, the situation described above seems to be the norm instead of the exception to the rule. Taxpayers are realizing that either their tax refund is lower, they owe money for the first time, o

How To Change Your Residency To Another State For Tax Purposes
How To Change Your Residency To Another State For Tax Purposes

If you live in an unfriendly tax state such as New York or California, it’s not uncommon for your retirement plans to include a move to a more tax friendly state once your working years are over. Many southern states offer nicer weather, no income taxes, and lower property taxes. According to data from the US Census Bureau, more residents

The Accountant Put The Owner’s Kids On Payroll And Bomb Shelled The 401(k) Plan
The Accountant Put The Owner’s Kids On Payroll And Bomb Shelled The 401(k) Plan

The higher $12,000 standard deduction for single filers has produced an incentive in some cases for business owners to put their kids on the payroll in an effort to shift income out of the owner’s high tax bracket into the children’s lower tax bracket. However, there was a non-Wojeski accountant that advised his clients not only to put his kids on the

New York May Deviate From The New 529 Rules
New York May Deviate From The New 529 Rules

When the new tax rules were implemented on January 1, 2018, a popular college savings vehicle that goes by the name of a “529 plan” received a boost. Prior to the new tax rules, 529 plans could only be used to pay for college. The new tax rules allow account owners to withdraw up to $10,000 per year per child for K – 12 public school, private school,

Moving Expenses Are No Longer Deductible
Moving Expenses Are No Longer Deductible

If you were planning on moving this year to take a new position with a new company or even a new position within your current employer, the moving process just got a little more expensive. Not only is it expensive, but it can put you under an intense amount of stress as there will be lots of things that you need to have in place before packing up and

Warning To All Employees: Review The Tax Withholding In Your Paycheck Otherwise A Big Tax Bill May Be Waiting For You
Warning To All Employees: Review The Tax Withholding In Your Paycheck Otherwise A Big Tax Bill May Be Waiting For You

As a result of tax reform, the IRS released the new income tax withholding tables in January and your employer probably entered those new withholding amounts into the payroll system in February. It was estimated that about 90% of taxpayers would see an increase in their take home pay once the new withholding tables were implemented.

No Deduction For Entertainment Expenses In 2019. Ouch!!
No Deduction For Entertainment Expenses In 2019. Ouch!!

There is a little known change that was included in tax reform that will potentially have a big impact on business owners. The new tax laws that went into effect on January 1, 2018 placed stricter limits on the ability to deduct expenses associated with entertainment and business meals. Many of the entertainment expenses that businesses

gbfadmin
Previous

How Much Emergency Fund Should You Have And How To Get There
Next

Why Do You Owe More In Taxes This Year?