Turbotax doesn't seem to be automatically adjusting my property taxes when I enter my NY STAR credit for NY, why even enter it if it does nothing?

Partly, it is a function of how the tax program works and partly it is a result of a requirement by the state.  Everything in TurboTax is entered at the federal level and then flows downhill to the state. The program is not designed to allow state modifications to reach backwards and change the federal tax information.  While the state wants you to confirm if you received a payment, it can’t go backwards into the federal program and change the federal information.

If you received a check in 2020 against the property taxes you paid in 2020, then you reduce the amount of property tax deduction that you claim in the mortgage interview.

If you received a check in 2020 for property taxes that you paid in 2019, that is a reimbursement of a previous deduction and is entered differently in the program. First, it is only taxable income if you itemized your property tax deductions on your 2019 return. If you did not itemize your deductions on your 2019 return, then the 2020 STAR payment is not taxable. If you did itemize your deductions in 2019, then the 2020 rebate is a “taxable recovery“, or a reimbursement of a previous deduction, and it is entered as “other uncommon income” on the income page.