People are talking a lot about a property tax break for older adults. If you have been hearing your friends and neighbors mention the property tax break for senior citizens, you may be wondering how you could benefit.
In this short article, you can find out about property tax breaks, variations across different states, and how to claim senior property tax relief.
Do you own a home? If so, you know that as you age, home values continue to rise and so do property taxes. However, for many retirees, incomes do not rise.
The good news is that when it comes to tax exemptions, several states have made moves to ease the tax burden for seniors. This is called a property tax break for seniors.
As many seniors know, property value and taxes continue to rise - but incomes may not. This is why so many are advocating for lower property taxes for senior citizens. Many states have responded to this issue by passing tax relief policies for certain homeowners such as senior citizens.
It sounds pretty wonderful, but there are some important things to realize.
Property tax exemptions don’t have any effect on the tax rate and most often do not come off your tax bill. You might be wondering, how this helps with tax deductions for seniors.
The answer depends on several factors.
Typically, property tax exemptions reduce the value of your home which is subject to being taxed. This means that you will pay less. Some states offer a certain percentage off of the home values. Other states offer a specific dollar amount.
Because property tax breaks are variable in different states, you have to do some homework. It is important to figure out whether you are eligible and then request the appropriate tax deduction.
It may take a bit of work, but if you ignore the breaks, you could be paying too much tax on your property. Since you never want to do that - take the time to understand how property tax breaks work and how you can qualify.
Qualifying for property tax breaks typically is for four types of categories.
The first is seniors. You may be eligible if you have a limited income and are at or above a specific age.
The second is people with disabilities. You may get an exemption if you have limited income and a disability keeps you from working or gaining income.
The third is veterans. Veterans of the armed forces may get an exemption with a service-connected disability rating of 80% or with a total disability.
The fourth is a homestead. Many states have a homestead property exemption that allows homeowners to protect a certain amount of the value of the property from taxes.
It is important to talk with your accountant or a professional advisor. As you review your options, most states provide websites about deadlines, qualifications, and filing instructions as tax guide for seniors.
Property tax guidelines and rules are very different from state to state.
Two rules typically apply. First, seniors are defined by a certain age. Second, you must live in the home as your primary residence.
“Seniors” is a term that is usually defined by a minimum age requirement such as 61 to 65. Some states such as Massachusetts, Texas, and New York have a minimum age requirement of 65. In others, like Washington, the minimum is just 61 years old.
Some states have increased exemptions as you age. New Hampshire, for instance, offers an increased exemption starting from 65 years on up.
Most states also set income requirements. Earned income can disqualify you, or reduce the amount of exemption you are entitled to claim.
To find out the specific rules in your state, do a Google search. Simply type in “senior property tax exemptions” and your state to find out the guidelines that apply.
What is possible in your state? Start by asking the question, “Is there a property tax break for senior citizens?” The answers vary widely from state to state.
Here are a few examples of property tax exemptions by state.
Some states are more generous than others in offering property tax breaks for seniors.
For instance, Wyoming and Nevada do not have any state income tax. This can be attractive to seniors who want to cash retirement plans, collect social security checks, and not have to worry about state income taxes.
A different solution is provided in New York. For people 65 years and older with an annual income of no more than $29,000 as of 2019, property tax is calculated at 50% of the home’s appreciated value. This essentially means that you only pay half of the taxes that would usually be due on your property.
Massachusetts property tax rules are not as friendly. Boston retirees must meet the requirement to have lived in Massachusetts for 10 years, or owned the property for 5 years. Additionally, you must be 65 by July 1st, and can only claim a $1500 exemption if your 2020 tax bill is less than your 2019 bill.
Washington offers tax breaks if you were at least 61 years old in the previous year and your income is below $35,000. If you meet these criteria for a full exemption, you pay the greater amount of either a) no tax on the first $60,000 or b) 60% of the assessed value
As you can see from the examples above, claiming senior property tax relief varies from state to state. Most states have websites that outline the state’s rules, filing requirements, and details for qualifying for a tax break.
Simply, look up your state. For example, the Oregon website provides deals for property tax deferral for disabled and senior citizens. Many states also provide access to information, talking with an agent, and getting help navigating the paperwork.
The short answer is, “yes.” The Internal Revenue Service (IRS) calls it “real estate tax” yet most homeowners use the term, “property tax.”
A deferral is a delay in when you pay property taxes. These are subject to guidelines such as age and income. The property tax gathers interest as long as it is unpaid and becomes a lien on your house. Property tax deferrals are about the ‘when you pay taxes. It is not about lower property taxes for senior citizens.
They are similar but not identical. Property exemption reduces your taxable income and can have a similar effect as a deduction. However, exemptions depend on your filing status and the number of dependents you claim and are distinctly different from property tax deductions.
While state rules vary, many states provide tax relief for retirees. If you have not checked on your state rules, you could be overpaying. Here at the Senior Assistance Club, we encourage you to explore your state regulations and get the relief you are entitled to on property taxes.