The STAR program: What you should know

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The New York State government years ago handed New Yorkers a tax break, yet many have not taken advantage of it.
If you are one of those people, now is the time to jump on board.
The original STAR program, introduced by Gov. Mario Cuomo to help lower school taxes for certain segments of society, was opened up by Gov. George Pataki to all citizens who own and occupy their homes. Segments originally eligible for the exemption through Cuomo’s efforts now are able to receive the “enhanced STAR,” which lowers the tax bill more than the basic program.
The basic STAR is an exemption to the school tax that allows homeowners who own and occupy their home to pay less in taxes each year. It lowers the amount of school taxes paid on a home, which is very beneficial to those of us living Upstate. Two years ago, the state government began sending rebate checks to individuals enrolled in the STAR program, which arrived in addition to the decrease in yearly taxes paid.
The enhanced STAR exemption is open to senior citizens, veterans, disabled citizens and clergy, and lowers taxes more than the basic STAR discount. Those who fall into one of the categories should contact town hall to learn more. In some instances, homeowners pay nothing to the school district because of the exemptions.
One potential issue with the STAR program is when a house with any of the enhanced STAR exemptions is purchased. Once the property is purchased, the new homeowner must be careful with taxes in the first year of ownership of the property: Tax departments will add the prorated amount of an exemption to the first new tax bill to make up for the lowered taxes. The amount of savings on the tax bill for an enhanced exemption will be calculated on a per day basis, then multiplied by the number of days the new owner owned the property. The amount is added to the tax bill, but many lenders do not catch the calculation when the bill is paid, so an escrow will go up more than it should. Work with a lender that is able to help when the tax bill comes due to avoid paying too much into an escrow later.
In the mortgage industry, I see many people buying, selling and refinancing homes. It amazes me how many people could qualify for the STAR program, but never follow through with the necessary paperwork. It only takes a few minutes to file, and only needs to be filed once in order to receive the break annually until the property is sold. The state does require reapplication every year to receive a STAR rebate check, however.
For more information or to download an application visit www.orps.state.ny.us.
Michael Swanson is a certified residential mortgage specialist and president of R&M Mortgage Inc. in Brighton. He can be reached at (585) 292-6160.