Senior Low Income Property Tax Exemption
May 6, 2021General Retirement
Low income seniors often have a hard time because they have a fixed income. If this is you, then you may benefit from property tax exemptions.
This article includes information about what tax exemptions are, the qualifications for them, different types of exemptions, and some examples of the types.
Senior property tax exemptions reduce the amount that you will have to pay in taxes. You will have to request the tax exemption from your state or county agency. Some areas will offer exemptions on a percentage of the home’s value, others offer a dollar amount.
The information in this article comes from the tax guide for seniors published by the IRS, but the programs are state managed and regulated. Check out this spreadsheet to see basic information about your state’s programs. You can also check out the property tax rates and averages for every state on this document.
Table of contents
Tax Exemption Basics
A tax exemption will make a portion of the income or assets tax-free. A tax exemption will not have any effect on tax rates and will not typically subtract from the tax bill. For property taxes, this means that the state may freeze the value of your home that the property tax is based on . Then the balance over its value that is over that frozen amount is not taxable even if the property value increases over time.
Some states will reduce the taxable amount of the value of your home by a percentage. Other states have a dollar amount that is qualified for exemptions. Property taxes are regulated and imposed at the state, county, and local level. Therefore, even though the IRS may have information about property taxes, they do not impose the taxes or provide the tax exemptions.
Since the state, local, and county imposes the property tax, there is no nationwide rule for them. This means that they can differ greatly depending on the state or even the city. Some states do have rules that apply to any region, city, or county in that state.
To understand how you can qualify for an exemption, and how much you may be able to qualify for, you will have to understand how property taxes work and how they are calculated. The local tax authority will send someone to your property for an appraisal. Then, this will be tagged with a market value that is based on sales in the area. It will also consider any amenities or upgrades. The area tax rate will be applied to this value.
Property Tax Exemption Qualification Basics
There are rules that can qualify you for any tax break and property taxes for low income seniors are no exception. Generally, you will have to be 65 years old or more to qualify. However, some states have property tax exemptions for other senior age limits as low as 61 years old. You may also qualify if you are disabled, widowed, or a veteran.
In addition, many states also require that you own the home for a certain length of time before you qualify for the exemption. You will also likely have to currently live in the property that you are looking to have exempt. It may also have to be your primary residence so vacation homes may not be eligible for property tax exemptions.
A lot of localities or states often have income requirements for the exemptions. If you have too high of an income annually, then you will not qualify or you will be able to take advantage of less exemption amounts.
Types of Exemptions
Typically, property tax exemptions are known as homestead exemptions. These are normally available to senior citizens in all states. States also often offer this type of property tax exemption to veterans, active service members, and those who have disabilities. They may also offer them to widows of veterans.
The credit from homestead exemptions will be applied to the annual property tax bill and this results in savings for the homeowner. Some states also have laws to protect families with homestead exemption from the forced sale of their home. Therefore, if you cannot meet the demands of the creditors, they will not be able to take away your primary residence. This may not apply in every state or for foreclosure on mortgages.
If you are over the age of 60, you may also qualify for a senior freeze. This is a type of property tax reimbursement that prevents the increase in value of the property to increase your tax bill. If you qualify, it will freeze the current assessed value of the home and the taxes will not increase from there.Then, after the value is frozen, you will receive a credit on the bill that will reflect the difference between the tax amount and any increases in the value of the property.
Another program that is less common is a circuit breaker. With this type of program, you can save money on your taxes based on the ability to pay the property taxes. Typically, this means that there will be a maximum percentage of income that a senior citizen can pay for their taxes with and anything above that amount may be exempt.
A few states offer property tax deferrals which allow any overdue or unpaid taxes to be deferred until the sale of a home. The unpaid real estate tax will be set up against a lien on the property and then this amount will be owed when the home is sold or when the owner passes away.
Deductions are different from exemptions. They are established by the local or county municipality and are most commonly offered to low income seniors, veterans, and those with disabilities.
You state, county, or local agencies may offer additional help or resources to low income seniors. You should contact your local tax office to ask them about any opportunities that may be available for you to take advantage of. They may also be able to work out a payment plan with you.
Examples of Property Tax Exemptions
Even though there are tax exemptions available for low income elderly people in most states, some states have more generous exemptions available. Each state also has their own unique programs that you may be able to take advantage of.
New York is an example of a generous state as far as property tax exemptions go. Their exemptions are 50 percent of the home’s appraisal value. You have to be at least 65 years old and they have income limits as well. The income limit for 2020 was $29,000.
Anchorage, Alaska also has a generous property tax exemption in place for seniors. They offer $150 thousand off the appraisal value of the property which may be a significant reduction for some people.
Houston, Texas has a great senior property tax exemption as well. Theirs is $160 thousand plus a 20 percent reduction off of the home value for any homeowner. Most seniors in this part of the state do not have any property taxes after they reach the age of 65.
Some areas are not as generous. Cook County, Illinois has an exemption maximum of $8 thousand. In addition, they do not technically offer a standard exemption. This is because the amount is not taken off of the value of the home. Instead, it is multiplied with the tax rate and then your tax bill will be reduced that amount.
Boston is known for having some of the least generous property tax exemptions in the country. They only offer $1000 for their elderly exemption. In addition, if this makes your tax bill less than it was in the previous year, you cannot claim it. Finally, you have to be 65 years old by July first and you must have resided in Massachusetts for the previous 10 years consecutively or have owned the property for at least 5 years. The income limits are capped at $24,834 for those who are filing as single and $37,251 for those who are filing as a married couple. Furthermore, all of your assets excluding your property cannot exceed the threshold limit of $40000 for single filers and $55000 for married filers.
As you can see, some cities, counties, and states are much more generous than others. In addition, some have qualifications that are more strict. This is the reason that it is always important to speak with your local agency. You should also contact your local agency to find out how to apply and take advantage of the property tax exemptions.
About THE AUTHOR
With multiple family members currently in senior living facilities, David is in the trenches every week, learning the ins and outs of nursing homes, assisted living, memory care, and general senior living.Read more about David Bolton
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