Property Tax Exemptions For Older Americans

When it comes to property tax, senior citizens often find themselves in a pickle. It’s hard for seniors or retirees to pay high property taxes because they are often on a fixed income.  

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However, various states, counties, and cities have responded to this issue by creating tax relief policies or tax exemptions for certain demographics, including senior citizens.

Here, we’ll discuss everything about property tax exemption. So keep on reading to learn more.

Tax Exemptions

Exemption in this sense doesn’t necessarily mean the deduction of your tax bill. It means the right to exclude certain assets, income, or a portion of assets and income from taxation by federal or state governments.

In income taxes, exempted income is not added to taxable income. For property taxes, the state or federal government can freeze the value of your property, on which property taxes are dependent, and the balance of its value over this amount is exempted from taxation as the home values increase. Various states slash the values of properties subjected to a dollar amount or percentage taxation.

In simple terms, property tax exemption means that you don’t have to pay as much property tax for your home.

The IRS doesn’t handle property taxes, they’re mainly imposed by states, country, and local government. As a result, property tax rules vary from one state to another or from and city to another.

How Property Taxes Work

The first step to understanding how property tax exemptions work is understanding how tax exemptions get calculated, beginning with an assessment.

A local tax body often sends an expert to appraise a home and assign it a market value. The market value gets determined by certain things, including corresponding sales in an area and the amenities added to the property. The expert then applies the area’s tax to the obtained value.

For instance, if an assessor estimates the value of your home as $300,000, and your area property tax rate is 4%, then your annual property tax will be $12,000.

Qualifying for Tax Exemption

To qualify for any tax breaks, you must meet some state guidelines, one of them being age.  Property tax exemptions are often reserved for seniors at 65 and above. And in the case of married couples who own a property jointly, only one spouse must be 65 or above.  

As we said earlier, the tax rules vary from one state to another. As such, 65 years is not a universal figure. In states like Washington, the minimum age for a senior property exemption is 61. Other states like New Hampshire allow you to benefit from an increased exemption as you get older, though you must be 65 and above to qualify.

In most areas, you must be the owner of your property for a certain period. In New York, you must own a house for 12 months, but if you were eligible for tax exemption at your former home, then you can transfer that time of ownership to your new residence. The same applies to Cook County in Illinois.  

You must also live in the home.  Some states like New York have a slight allowance for this regulation. So, if you move to a nursing or retirement home, you can still qualify for a property exemption as long as that you’re still the owner of your home or your spouse stills reside there.

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Also, many areas set income requirements.  If you’re earning too much, you may get disqualified, or your exemption amount might get reduced. The income limits can be strict in some locations, and they often range between $20,000 – $30,000.

In some states like New York, the state allows seniors to subtract the cost of prescribed medications and expenses related to healthcare from their income so they can qualify for the exemption.

States with Senior Property Tax Exemptions

Some cities aren’t always proactive in providing retirees with the needed help when property taxes come into play. But some like Anchorage, Houston, New York, and Honolulu, are always willing to help their seniors.

New York for instance offers its seniors a Citizen Exemption of 50 percent of their home appraisal value- that’s if they are 65-years or above and have below $29,000 in annual income as of last year.  

Anchorage offers its seniors a dollar amount tax exemption of $150,000 off the assessed market value of their homes. This means any senior living in Anchorage, Alaska only pays a $3,000 tax bill on a home appraised at $250,000 at a tax rate of 3%.  So, $250,000 minus $150,000 results into $100,000 multiplied by 3 percent.

Things are better in Houston. Senior homeowners receive a $160,000 as well as a 20 percent reduction off their home values.  Most retirees living in this area of Texas don’t pay taxes for their property, but that’s if they’re age 65 and their primary place of residence is Harris County home.

Honolulu offers its elderly homeowners a $120,000 property tax exemption, but in 2020 it increased by $20,000. Today, its $140,000, all thanks to the 2019 legislation.  The minimum age qualification for property tax exemption is 65 years and above, just like in many other states.  

Finally, we have Boston.  Boston will provide you with only a $1,000 senior exemption. However, you can’t qualify for it in 2021, if the exemption makes your annual tax bill less than its 2020 value. Also, by July 1 you must be 65 and have resided in Massachusetts for over  10 years, or owned your current property for 5 years. 

In 2021, incomes that qualify for the exemption are limited to $24, 834­ – that’s if you’re single. But if you’re married, then it’s limited to $37, 251.  If you’re single, the total value of your possessions should not surpass $40,000. For married individuals, it should not surpass $55,000.

Can Seniors Secure Multiple Tax Exemptions?

Most states provide senior citizens with more than one type of property tax exemptions.  You can even combine two or more tax exemptions in your location to manage your annual tax bill.

In other locations, you can apply for senior tax exemption twice if you’re being taxed on different levels. For example, by your county, and by your city.  Illinois allows you to couple up regular homeowner’s exemption and senior tax exemption.

States with the Best Property Taxes

While most states provide senior citizens with some kind of property tax exemption, some are more kind than others. In this section, you’ll find 10 US  states offering  affordable property tax rates in 2021:

  • Hawaii: 0.30%
  • Alabama: 0.40%
  • Louisiana: 0.52%
  • Wyoming: 0.55%
  • West Virginia: 0.55%
  • Colorado: 0.56%
  • South Carolina: 0.56%
  • Delaware: 0.58%
  • Utah: 0.62%
  • Arkansas: 0.64%

These figures are state-wide median tax rates and may not the actual rates in every city.

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Property taxes vary depending on the location, so it’s best to contact a tax appraiser or assessor in the city where you have a property. An assessor will help you understand what the government offers and the eligibility requirements.