Property Tax Relief

Property Tax Relief Programs

A large property tax can result in financial stress for seniors (Golant, 2003). States offer various tax abatement programs to alleviate this problem. Many of these are available to all taxpayers, some are targeted to poor persons, and others are specifically earmarked for the elderly. Property tax relief comes in three different forms (National Conference of State Legislatures, 2002): homestead exemptions and credits, circuit breaker programs, and property tax deferral programs.

Homestead Exemptions and Credits

Forty-eight states and the District of Columbia offer these programs. Homeowners get relief because the amount of their property taxes is not based on their total assessed property value, but rather on some smaller dollar amount. Similar relief is offered by homestead credits, but some dollar amount is subtracted from the actual property tax rather than from the assessed value. In 17 states, the elderly and non-elderly receive the same tax relief benefits; in 12 states, the elderly and non-elderly receive the same tax relief benefits; in 12 states, only seniors receive benefits; and in 12 other states and the District of Columbia, both seniors and non-seniors receive benefits, but the former are more generous. The actual dollar value of the tax relief depends on a particular state's program.

Circuit Breaker Programs

These programs give refunds to lower-income and disabled homeowners and renters when their estimated property taxes (or imputed taxes for renters) overload (i.e., exceed) some percentage of their income. Most states target the elderly. The amount of tax relief will depend on the size of the household's income and the amount of its property taxes. Twenty-six states and the District of Columbia offer property tax relief programs to both renters and homeowners; five states (Idaho, Oklahoma, South Dakota, Washington, and Wyoming) offer these programs only to homeowners; and Alaska and Oregon offer tax relief only to renters.

Property Tax Deferral Programs

These programs allow homeowners to put off paying their property taxes by borrowing on the equity in their homes. These deferred taxes and the accrued interest then become a lien on the value of the home. When homeowners sell their dwellings or die, the debt becomes due. This type of financial relief shares similarities with reverse mortgages. Twenty-four states and the District of Columbia offer this program. The age eligibility of seniors, their income caps, and the upper amount of deferred taxes vary by state.

Older Homeowners' Use of Property Tax Relief Programs

An AARP investigation found that older homeowners applied for homestead exemption programs more often than circuit breaker and homestead credit programs. Property tax deferral programs were the least used. Seniors reported that they did not apply for these programs because they did not know about them or because they needed help with the applications. AARP argued for the need for further outreach efforts (Baer, 1998).

The information above is reprinted from Working with Seniors: Health, Financial and Social Issues with permission from Society of Certified Senior Advisors® . Copyright © 2009. All rights reserved.