Property Tax Exemptions: Seniors, Veterans And Others Who Qualify
February 02, 2024 6-minute read
Author: Victoria Araj
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 you owe is based on the assessed value of your home.
Some states only reassess your property value when certain events occur, such as the sale of your home or a new addition. However, many other states 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 to find out if you can benefit from one.
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How Do Property Taxes Work?
Real property tax is handled a bit differently from 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.
An escrow account can help relieve the burden of property taxes. In an escrow account, your taxes and homeowners insurance payments are split into monthly portions as part of your mortgage payment. Still, getting property tax exemptions could help you quite a bit.
How Property Taxes Are Determined: Example
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 $6,810.
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 process.
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 want 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 veteran 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 surviving spouses who have not remarried. 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.
Disabled persons may also qualify for tax deductions, income exclusions and credits in addition to property tax relief. For example, home modifications such as wheelchair ramp access, wider doorways and lower countertops could be deductible on your taxes as medical expenses.
Taxpayers using a home as a primary residence may qualify for a homestead exemption. Most states have a homestead property tax exemption that allows you to protect a certain amount of your primary property’s value from taxes. You can structure the exemption to either 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 to save even more on property taxes.
What’s The Difference Between A Property Tax Exemption Vs. Deduction?
Exemptions are significantly different from tax deductions available to homeowners.
If you have a property tax exemption, you don’t have to pay that particular tax when you’re filing your taxes. An exemption can help you avoid a property tax bill completely while a deduction can help you lower your tax liabilities at tax time. If you have a property tax 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 2023 tax year is $13,850 for single people and those married and filing separately. That amount is removed from their income for the purposes of the tax return.
How To Claim A Property Tax Exemption
If there is a property tax exemption you think you may qualify for, there are a few short steps to take to claim it.
- Confirm you’re eligible. The first step is to check and confirm with your state and local tax authorities that you meet all the qualifications. If you’re a veteran, you’ll also want to confirm with the Department of Veteran Affairs (VA) office.
- Gather the documents. Once you’ve confirmed your eligibility, collect and organize all the required paperwork before you apply. This typically includes a general application form, proof of ownership, proof of income and, if applicable, proof of disability.
- Submit your application. Now that you have all the paperwork, visit your state or local tax collector or department of revenue’s website to ensure you apply before the deadline. You don’t want to miss out on potentially saving thousands of dollars.
Claiming Multiple Property Tax 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’re unsure about the exemptions available in your state, visit your state’s revenue website or consult with your local tax collector’s office to learn more. You may also find it helpful to 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’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.
Looking for more ways to cut costs? Discover how to lower your mortgage payment and start saving today.
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