Property Tax Exemptions: Seniors, Veterans And Others Who Qualify
Victoria Araj6-minute read
February 22, 2023
Property taxes can be a steadily rising expense at odds with your budget. Luckily, there are some exemptions that can lower your tax burden if you qualify.
Let’s take a closer look at the property tax exemptions you may qualify for.
What Is A Property Tax Exemption?
If you own real property tied to land or a home, then you’ll owe property taxes to the county or local tax authority. The amount owed is based on the assessed value of your home. Some states only reassess your property value upon certain events like the sale of your home or a new addition, but many others have tax assessors look at the value on a regular basis. So, if the value of your home continues to rise, your property tax bill will likely rise with it.
To get an idea of when and if property taxes are reassessed, you can contact your local assessor’s office for more information.
Property taxes can be a burden on any budget – but they can especially impact certain homeowners. With that, the government has created property tax exemption programs to assist property owners by lowering or eliminating their property tax bill. Although the rules will vary by state, you could stand to save thousands from a property tax exemption. Be sure to speak with a financial advisor or certified tax preparer in order to find out if you can benefit.
Exemptions are significantly different from tax deductions available to homeowners. An exemption can help you avoid a property tax bill completely. A deduction can help you lower your tax liabilities at tax time.
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Who Is Exempt From Paying Property Taxes?
Some types of properties are exempt from real estate taxes. These include qualifying nonprofit, religious and government properties. Senior citizens, veterans and those eligible for STAR (the School Tax Relief program) may qualify for exemptions as well. There’s often an exemption application that needs to be filled out.
There are also often exemptions for low-income individuals. The exact exemptions you qualify for will depend on your financial situation, your home state and even your local municipality.
Senior Property Tax Exemption
States often provide tax exemptions for senior citizens who have reached certain ages. Some areas may base eligibility on Social Security status. The details of the senior exemption vary based on the state, and there are often residency and income restrictions. Some of the statutes just defer the taxes until the property is sold.
For details, contact your local department of revenue. You’ll have to read the fine print, but it’s still worth looking into the tax laws in your area.
Veteran Property Tax Exemption
Members of the Armed Forces and veterans are often able to claim an exemption from various taxes, including property taxes. The details vary widely by the state you live in, but any potential veterans exemption programs are definitely worth checking out.
Depending on your situation, you may be able to exempt a certain amount of property value or even get a complete waiver from property taxes. There may also be tax benefits available for qualifying unremarried surviving spouses. In either case, a veteran property tax exemption could potentially save you thousands.
If you’re a person with a disability, you may be able to get relief from some portion of your property taxes. In this case, there’s a wide variation in local policies. Be aware that you might have to prove or sign an affidavit attesting to your disability.
Regardless of whether you qualify for property tax relief, there are a variety of potential exemptions and credits disabled persons could take a look at in other areas of your taxes. For example, home modifications to provide for ramp access or to make it easier to get around inside the house could be deductible on your taxes as medical expenses.
If taxpayers are using a home as a primary residence, they may qualify for a homestead exemption. The majority of states have a homestead property tax exemption that allows you to protect a certain amount of the value of your primary property from taxes. This can be structured to either allow you to exclude a flat amount or a percentage of your taxable value. This limits the maximum amount you have to pay in real estate taxes.
Depending on your state, you may be able to protect $5,000 – $500,000 of your principal residence's value. A handful of states, including New Jersey, don’t offer any homestead exemption.
Some states will offer an even larger homestead exemption for married couples and joint owners. This can allow you to save even more on property taxes.
How Do Property Taxes Work?
Real property tax is handled a bit differently than personal property or income taxes. Property taxes are based on the assessed value of your home. In all cases, this is based on your property value. Whether it’s your full property value depends on the jurisdiction you’re in.
For example, the taxable portion of your home’s value given by an assessor may be limited to some portion of its actual value pursuant to state law. If the valuation is $250,000, the taxable value of the property may only be $125,000, for example.
Property taxes are assessed using a unit called a mill. Mill might strike you as meaning million, but for the sake of tax math, you want to think about the metric system. Mills are assessed based on every $1,000 of property value.
Example Of How Property Taxes Are Determined
Let’s say, hypothetically, a city decides to sign an $800,000 contract for trash pickup and $2 million is spent on maintenance for city parks. The school district budget is $4 million. Now let’s say the tax base has $300 million of assessed value. The effective local tax rate is 2.27% ($6.8 million/$300 million). On a home with $300,000 of assessed value, the annual property taxes would be $6,800.
One factor that helps relieve the burden of property taxes is that most people opt for an escrow account, so their taxes and homeowners insurance payments are split into monthly portions as part of their mortgage payment. Still, getting property tax exemptions could help you quite a bit.
What’s The Difference Between A Property Tax Exemption Vs. Deduction?
If you have a property tax exemption, you don’t have to pay that particular tax when you’re filing your taxes. If you have a deduction, the amount of the deduction simply lowers the income that you have to pay the tax on.
To take a simple example, the standard deduction on federal taxes for the 2021 tax year is $12,950 for single people and those married and filing separately. That amount is removed from their income for the purposes of the tax return.
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Claiming Multiple Exemptions
Depending on where you live, you may be able to claim multiple property tax exemptions. Although different states have different rules, many will allow you to claim more than one exemption.
If you aren’t sure about the exemptions available for you in your state, take a minute to check out your state’s revenue website. Beyond the information available at the state-wide level, you can consult with your local tax collector’s office. If you cannot find the answers you need, then give the tax collector’s office a call for further guidance or discuss your options with a tax professional.
Property Tax Exemption FAQs
Below are a few of the most common questions regarding property tax exemptions.
Are disabled veterans exempt from property taxes?
Yes, many states offer disabled veterans the property tax exemption. Check with your state or local government office to determine whether this exemption is available to you.
What types of properties are exempt from property taxes?
Property tax exemptions don’t just apply to primary residences. Qualifying religious organizations, nonprofit groups, government buildings and other property types may claim property tax exemptions.
How do I know if I qualify for a property tax exemption?
You can determine whether you qualify for different property tax exemptions by reviewing your state and local websites, calling the local tax collector’s office or checking with a tax professional.
The Bottom Line: Save Money With An Exemption
If you determine that you’re eligible for an exemption, take action to file the paperwork as soon as possible. You might be able to save thousands of dollars through a couple of minutes of research and a quick filing process. Although the exact amount you’re able to save will depend on your home state and your property, it’s worth taking a closer look at your options.
It’s important to stay informed on updated tax policies when tax season comes around. In addition to the property tax exemptions you may be eligible for, you may also qualify for a range of tax deductions. Learn how claiming the property tax deduction can save you money during tax time.
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