Can You Tell Me About Programs That Help Older Homeowners With Taxes?
Q: I’ve heard there are programs that allow older homeowners to get help with property taxes. Can you tell me anything about these?
A: For retirees living on fixed incomes, the ability to continue living in your own home often boils down to what you pay in property taxes. According to a story appearing in USA TODAY, owners of single-family homes paid an average of $3,296 in property taxes in 2016, roughly 1.15% of the appraised real estate value in 2016.
There are programs in almost every locality that could possibly lower your tax bill, but you will need to take time to research what is available, and file the necessary paperwork if you meet the guidelines. Some areas allow people living on fixed incomes to pay their real estate taxes in monthly installments rather than semi-annually. Here are details on two of the most common types of tax programs:
- Exemptions: An exemption waives some, or even all, of the tax you owe depending on your age, income, and where you live. (Don’t automatically assume that you must be age 65 and older, some areas allow people younger than 62 to apply.) Some exemptions allow you to exclude a portion of your property from taxation. For example the Homestead exemption in the state of Colorado allows a 50% deduction for the first $200,000 in property (or a $100,000 exemption) for taxpayers over age 65, who have lived on their property for ten consecutive years. In many areas of the country, exemptions are more closely tied to age, disability, and income. For example in Orange County, Virginia, taxpayers must be age 65 or older, have a combined household income under $40,000 and a net worth no greater than $90,000 excluding the value of the dwelling and land (not exceeding two acres). The exemption must be applied for every year.
- Deferrals: Two-dozen states, including California and Texas, permit some form of tax deferrals for older taxpayers. These programs allow older homeowners to put off paying real estate taxes for as long as you remain in your home. When program participants do eventually sell or pass away, the state claims the balance of what you owe, including interest. Eligibility depends on age, residence and, in some instances, income and property value. Minnesota’s deferral program, for example, allows homeowners 65 and older with household incomes of $60,000 or less to defer a portion of property taxes. Eligible taxpayers are still responsible for paying property taxes equivalent to 3% of household income. For example, if your income was $15,000 in the year prior to entering the program, you would be responsible for 3% or a tax of $450. That would be the maximum you would be responsible for paying each year you participate. If your tax is $1,450 you would pay $450 and the remaining $1,000 would be paid by the state of Minnesota, directly to your county. The interest on the loan changes annually, but is capped at 5%. Be sure to learn all the rules, and read the fine print. Tax deferrals are like a loan. The state attaches a lien on your property, meaning the state can take possession of the home as payment for the loan if you no longer qualify for the program and don’t repay.
To learn more about programs in your area, contact your county or local government’s tax office.
Sources: “Comparing Average Property Taxes For All 50 States And D.C.,” Constance Brinkley-Badgett, Credit.com, USA TODAY, April 16, 2017.