Heavy property taxes could break the bank, for many seniors and retirees, especially for those on a fixed pension or income. Learn about how tax relief policies or exemptions can help.
What is property tax exemption for seniors?
First, we need to clarify that the term exemption here does not necessarily refer to a discount in the amount of property taxes seniors must pay. The word exemption could also refer to certain allowable exclusions that seniors (and people who fall in other identified or qualified demographics) may make when it comes to declaring their taxable assets. These exemptions are predetermined by the state, city, county, or locality in which you live, and may include certain types of income and assets, or a portion of said income and assets. In other words, as a senior—and depending on the mandate of your state, city, county, or locality —a portion of your income or assets may be considered exempt from taxation.
For instance, in the case of property taxes, that state or locality in which you live could freeze the assessed value of your home on which property taxes are based, and the amount beyond that value is considered exempt from taxes.
Some states, though, do offer exemptions in the form of discounts to assessed property tax values.
How do property taxes work?
The fundamental thing you need to know when it comes to the property tax process is your home’s assessed market value. A state-accredited assessor or local tax expert will come over to appraise your home and assess its market value, depending on factors like where you live, improvements you have made to the property, and the like. Then, the assessor will multiply that value by your area’s assigned property tax rate to come up with your annual property tax. Note that the rate is entirely determined by the state, city, county, or locality in which you live; the IRS has no hand in real property tax matters.
To put it more concretely, if the assessor deems that your home has an assessed market value of $200,000, and your locality has an area tax rate of 3%, then you would have to pay $6,000 in annual real property taxes.
To save yourself from overly high property taxes, you must qualify for exemptions.
How do I qualify for senior property tax exemptions?
For you to qualify for any sort of property tax break, you must meet certain criteria set by the state in which you live. Note that some states have better property tax rates and exemptions for seniors than others. Criteria to consider typically include the following:
- Must be 65 years old or older, although in some places, like Washington State, the qualifying age is 61 or older
- If a property is jointly owned by a married couple, only one spouse is required to meet the age qualification to claim the exemption
- Many locales will require proof that you have owned the property for a certain period of time; some places allow you to carry over your qualification from a previous place of residence to a new place of residence in the same area
- You and/or your spouse/co-property owner must live in the property; that is, the property must be your place of residence, and not leased out for rental or commercial purposes
- Most locations have income limitations; meaning, if you earn more than a certain amount, you may not qualify for an exemption
- Some areas, like New York, allow seniors to deduct the cost of their prescription medication, as well as other medical expenses, from their income to enable them to qualify for the set requirements
- You will need to find out your state’s specific rules regarding multiple tax exemptions; for instance, you may be able to claim your property tax exemptions alongside other exemptions offered by your area to further lower your taxes
How does the senior property tax exemption differ from state-to state?
As previously mentioned, some states have better property tax rates and exemptions for seniors than others. Some states offer significant tax exemptions for seniors, with these four being among the most generous:
- New York offers Senior Citizen Exemption which, as of 2020, is 50% of your home’s appraised value, if you meet their criteria for age and income limits
- Anchorage, Alaska offers $150,000 off the appraised value of your home as of 2020, if you qualify
- Houstonoffers senior homeowners $160,000 plus a 20% reduction off appraised home values, as of 2020
- Honolulu’s 2020 senior property tax exemption was set at $140,000 of the assessed value of the home
Remember, those amounts are deducted from the home’s assessed market value before applying the area’s tax rate to come up with the property tax amount to be paid.
What about property tax rates?
While a sizeable senior citizen exemption may be nice, it might also be helpful to check the property tax rates of the area, to begin with. As of 2021, these states offer some of the friendliest rates, when it comes to property taxes. Note that these are median or average rates across each state; you would still need to find out the actual rate per jurisdiction or specific locale within the state:
- 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%
When it comes to taxes and tax breaks of any sort, know that there are many moving parts, all of which can shift yearly. But, in the midst of all those variables, there are certain benefits you may qualify for as a senior. As far as real property tax breaks go, make it a point to check with your area’s tax assessor to know exactly what’s available to you and if you qualify. Your savings, annually, may very well be worth the effort you make towards learning more about real property taxes.