Property Tax Exemptions: Seniors, Veterans And Others Who Qualify
Sarah Sharkey3-minute read
April 20, 2021
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 edition, but many others have been assessor 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.
Great news! Rates are still low in 2021.
Missed your chance for historically low mortgage rates in 2020? Act now!
Who Is Exempt From Paying Property Taxes?
Some types of properties are exempt from real estate taxes. These include qualifying nonprofit and 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 situation and your home state and even your local municipality.
Senior Property Tax Exemption
States often provide tax exemptions for senior citizens who have reached certain years of age. 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 exempt themselves from various taxes, including property tax. The details vary widely by what state you’re in, but it’s any potential veterans exemption is definitely worth checking on. 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, that 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. However, 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 back to science class and the metric system. Mills are assessed based on every $1,000 of property value.
The above concept is important to know because when tax policies are put to vote, it’s often in a millage. What you’re voting for or against is a tax of a certain amount per $1,000 of property value. Special local assessments are often put to a vote.
I’m going to give an example of the way local taxes are worked out. Before I get into this, these budget numbers are purely pulled out of thin air. City managers and school district officials, please don’t write us.
Let’s say the city decides to sign a $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.
You can see how this begins to add up. One thing that helps a bit 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 exemptions could help you quite a bit.
What’s The Difference Between A Property Tax Exemption Vs. Deduction?
We touched on this a bit earlier, but before we wrap up, we should take a moment to go over the difference between the property tax exemption and a deduction.
If you have a property tax exemption, you don’t have to pay that particular tax. If you have a deduction, that 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 2020 tax year is $12,400 for single people and those married and filing separately. That amount is removed from their income for the purposes of the tax return.
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.
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 is definitely worth taking a closer look at your options.
If you’re a Rocket Mortgage® client who has been approved for an exemption by your local tax authority, you can upload documentation so we can reflect that in your escrow payment as soon as possible.
If you’re looking for ways to make homeownership more affordable, then consider applying to refinance. A refinance into a mortgage with a lower interest rate could save you thousands over the lifetime of your loan with a lower monthly payment. Another option for senior homeowners is to take out a reverse mortgage, which can help to ease the burden of homeownership costs. Rocket Mortgage® does not offer reverse mortgages.
However, property tax exemptions are a great way to potentially save thousands with just a small amount of paperwork. While we hope this has helped you learn a little bit more about property tax exemptions, if you have any questions about your personal situation, please speak with a tax advisor or your local tax authority.
See What You Qualify For
Property Tax And Assessments: What They Are And How They’re Calculated
Katie Ziraldo - September 10, 2021
Most American property owners are responsible for paying property taxes. Learn more about property taxes, assessments, and how they’re calculated.
How Property Taxes And Insurance Can Affect Your Monthly Mortgage Payment
Servicing - 2-minute read
Victoria Slater - September 10, 2021
There are many reasons why your monthly payment can change. We look at what influences taxes and insurance and explain how these factors can change your monthly payment.