By Sarah Hall
Editor
If you’re looking to buy a new home, be prepared for major changes in how you pay your school taxes.
As part of the 2016-17 budget, New York state made major changes to its STAR exemption program for new homeowners. Retroactive to March 1, 2015, the STAR program has been converted to an income tax credit. Now, first-time home buyers or those purchasing a new home will pay their school taxes in full up front and receive a credit on their income taxes.
Those who remain in their current homes will retain their existing STAR exemptions.
Basic STAR exempts the first $30,000 in school taxes for homeowners whose total household income is less than $500,000, while Enhanced STAR exempts those 65 and older with qualifying incomes from the first $65,300 in school taxes. STAR savings vary widely by district, but the average in Central New York is $715 for Basic STAR and double that for Enhanced STAR.
Assemblyman Bill Magnarelli (D-Geddes), who represents the 129th Assembly District, said the change came directly from Gov. Andrew Cuomo’s administration.
“It’s something the governor had wanted,” Magnarelli said. “The way the budget is put together on the state level, it becomes a revenue item instead of an expenditure. The administration felt this would be a better way to go going into the future.”
In addition, the change will guarantee that school districts get more of their money sooner.
“The school districts are not waiting for their money to come in from the administration,” Magnarelli said. “They have it more immediately.”
Magnarelli stressed that the STAR exemption is not going away.
“Nothing is being taken away from anybody,” he said. “That’s totally false. Nobody is going to lose their STAR exemption because of this legislation. Let’s be clear on that. Under the old law, anybody who’s staying in their home now and doesn’t sell, nothing changes. You still get the credit right on your tax bill. For example, if your bill is $1,000 and you had an exemption of $100, the line that says how much you pay says $900.”
Magnarelli said the new law just changes the way the exemption is distributed for new homeowners.
“Under the new law, when you sell your house or become a new homeowner, you do not get the exemption,” he said. “On your bill, it says the tax is $1,000 and at the bottom, it says pay $1,000. Immediately, the taxpayer pays the school district and the school district gets its money immediately. It’s the taxpayer that waits to get the check. Nobody loses their exemption. You still get that $100 exemption. In no way does this bill do away with that. It does change the way assessors administer it at this time.”
While current homeowners may have nothing to worry about, current assessors aren’t so lucky. Many local assessors have a number of concerns about the new legislation, not the least of which is the fact that the state still hasn’t set up the promised website or hotline to help with the transition.
“We’re now at mid-May,” said town of Salina assessor Denise Trudeau. “The state doesn’t have a website up yet for people to check. They have a number set up, but no one to man it. They don’t have letters for us to use to send out to people. We have to send out just under 500 letters telling people, ‘Sorry, that STAR exemption we told you you were all set for, turns out you’re not.’”
Trudeau said she was concerned about what that lack of organization meant for the future.
“My two biggest fears — for one, in September, when they’re supposed to send out the checks, they’re not going to have time to administer this,” she said. “There are probably 200,000 checks that are going to have to be mailed out. They have to verify that they qualify. They have to verify the school districts. They have to verify the STAR exemptions in the districts, because they’re all different. They have to figure out how much the savings are. They have to cut the checks. They have to approve the checks. They have to mail out the checks. They have to do all of that in six months.”
Trudeau said she’s also worried that people who aren’t accustomed to getting a rebate instead of a credit won’t budget properly.
“My other fear is people will then get a check in September and not realize that check should go to their escrow. Otherwise their escrow will be short,” she said. “They’ll get a letter saying their mortgage payment’s going up by $200 a month because they’re short. People won’t be able to afford it.”
Magnarelli acknowledged that the change would take some getting used to.
“There is a timing issue here that could be problematic for some people — for assessors, for banks that are holding mortgages and escrowing taxes — now the bank has to have more money on hand to pay those when they’re due,” he said. “It’s going to be harder in the first year or so. People are going to have to get used to paying the full bill.”
Trudeau said she and other assessors she had spoken to in Central New York were baffled as to why the legislation was made retroactive to last March.
“I think it was ridiculous to implement this going back to last year,” she said. “You want to implement it, fine. Make it for March of this year. Everybody will know about it. They can apply online and know about it up front. But this was crazy.”
Magnarelli said he didn’t know why, either.
“I don’t have an answer. The administration was adamant about it,” he said. “There were a lot of other proposals that were originally part of it that were a lot more onerous on the taxpayer, but we were able to protect Basic STAR and Enhanced STAR and no one lost anything.”
Magnarelli encouraged anyone buying a home to apply for STAR at tax.ny.gov. To receive a check in September of this year, if you’re a new homeowner, or if you have moved, you need to be registered for STAR through the state Department of Taxation and Finance by July 1. After July 1, you can still apply for STAR or Enhanced STAR, and then the state would provide you a check at a later date. Anyone with questions can contact Magnarelli’s office at 428-9651 or email [email protected].
