Common Property Tax Exemptions
Posted: Apr 20, 2010
By: Barbara Eisner Bayer
Published: September 28, 2009
Property tax exemptions are available to many homeowners, but you’ll need to do some legwork to find them and lower your property tax bill.
Depending on where you live, you may quality for tax exemptions when you fix up a residential property. Image: Veer
Nobody likes paying a dime extra in taxes. Yet when it comes to property tax bills, some homeowners pay too much simply because they aren’t aware of the common property tax exemptions that exist in most communities.
Many exemptions aren’t automatic. You’ll need to determine for yourself what they are and whether you qualify. Contact your local tax assessor. Property tax exemptions vary not just by state, but by jurisdictions within each state. Research and paperwork might require four hours, but the effort could lower your tax bill noticeably.
Many states offer a homestead exemption to homeowners who occupy their homes as primary residences for a majority of the year. Some states require a minimum term of residency before you can apply. In Maine, for example, it’s 12 months; in Alabama, you can qualify in two to six weeks. The exemption may lower a home’s assessed value by a percentage, say 15%, or a dollar amount such as $25,000. Some states tie the homestead exemption to other criteria such as age or income level. Each locality has its own rules and time frames for filing. Some even require homeowners to re-apply each year.
Seniors and the disabled
Many states offer generous property tax exemptions to both older homeowners and the disabled. South Dakota, for example, has multiple relief programs that allow both groups to seek property tax refunds and reductions in real estate assessments. There are age, income, and residency restrictions. Read the fine print. A homestead exemption aimed at the elderly may only defer property taxes until the home is sold. And don’t assume exemptions for seniors kick in at 65. Some may start at 60 years old, while others begin at 70. Disabled homeowners may be required to show proof, such as eligibility for Social Security disability benefits.
Service to your country abroad may grant you property tax relief at home. Exemptions are generally available for veterans who own a home (primary residence), served during wartime, and were honorably discharged. Some states offer them to all veterans; some, like Pennsylvania, to disabled vets. To qualify, you’ll probably need to provide proof of service. You may also have to meet length of residency requirements and income restrictions. Frequently, this exclusion is eligible for the spouses of veterans who lost their lives in war, and sometimes it’s available to parents of the deceased as well.
If you like to renovate, you’ll love these tax breaks. In the North Dakota cities of Bismarck and Fargo, fixing up a residential property that’s more than 25 years old can earn you a five-year exemption from paying property taxes on the value the remodeling added to your home. In Pierce County, Wash., you can get a three-year exemption for home improvements. Check with your tax assessor’s office before tearing anything down, however, because applications may need to be approved before work begins. Renovations of historic properties may also be eligible for property tax breaks.
Installing renewable energy systems in your house could pay off on your property tax bill as well as your energy bill. Many states are excluding the value of certain green improvements from a home’s real estate assessment. Eligible upgrades may include the installation of solar water heaters, geothermal heat pumps, or photovoltaics. Look for information on state and local property tax breaks for renewable energy systems on the Database of State Incentives for Renewables & Efficiency, or DSIRE for short. Click your state on the interactive map, then follow any links listed under Property Tax Exemptions.
A visit to your local tax assessor’s office may turn up other less common property tax exemptions. Maine Township, Ill., offers a long-time occupant exemption for people who’ve owned their homes continuously for 10 years and earn less than $75,000 annually. Some counties in New York State reduce the assessed value of the homes of volunteer firefighters. Many states offer widow/widower exemptions. It doesn’t hurt to ask.
Are exemptions worth the effort?
In 2008 the U.S. median property tax paid was $1,897 annually, or 0.96% of the median home value of $197,600. The highest median property tax was paid in Westchester County, N.Y.: $8,890; the lowest, St. Landry Parish, La., at $140. Savings from exemptions will vary widely depending where you live, the value of your home, and what you qualify for. A $15,000 exemption on the U.S. median home value of $197,600 would result in annual savings of about $144. A 15% exemption would save about $285.
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Barbara Eisner Bayer has written about mortgages and personal finance for the past 15 years for Motley Fool, Daily Plan-It, and Nurse Village, and is the former Managing Editor of Mortgageloan.com and Credit-land.com. She splits time between a beachfront condo and a mountain retreat, which leaves her with double the pleasure and double the headaches of home ownership.