Property tax rates are on the rise nationwide, creating challenges for many homeowners, including retirees. Data shows that last year’s property tax bills increased up to 30% in some places.
If you own a home, you can't avoid property taxes altogether without risking penalties. However, some strategies and programs, an lower your property tax bills and help your budget.
Property tax exemptions
Here are some the more common property tax exemptions that could help your budget.
Homestead exemption: The homestead exemption reduces the assessed value of a primary residence and results in lower property taxes.
A few examples are:
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Florida: It offers a homestead exemption of up to $50,000. To qualify, the property must be your permanent residence and you must have owned the property as of January 1 of the tax year.
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Texas: It offers a basic homestead exemption of $25,000. To qualify, the property must be your primary residence as of January 1 of the tax year.
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Georgia: It offers a homestead exemption of up to $30,000. To qualify, you must own and occupy the home as your primary residence as of January 1 of the tax year.
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Louisiana: It offers a homestead exemption of up to $75,000. To qualify, you must own and occupy the home as your primary residence.
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Alabama: It offers a homestead exemption of up to $4,000. To qualify, you must own and occupy the home as your primary residence.
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Illinois: It offers a homestead exemption of up to $6,000. To qualify, you must own and occupy the home as your primary residence.
“Senior citizen” exemption: Many states offer exemptions, usually for those 65 or older, to help alleviate the financial burden on retirees living on fixed incomes. These exemptions typically have age and income requirements.
Here are a few examples:
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Florida: It offers an additional homestead exemption for seniors over 65. The amount varies by county. To qualify, you must be 65 or older and meet certain income requirements.
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Texas: It offers a senior citizen exemption of $10,000 for homeowners aged 65 or older. To qualify, you must be 65 or older and the property must be your primary residence.
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Georgia: It offers a senior school tax exemption (amount varies by county) for residents aged 65 or older. To qualify, you must be 65 or older and meet certain income requirements.
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South Carolina: It offers a homestead exemption for seniors over 65. The exemption amount is based on the assessed value of the home. To qualify, you must be 65 or older and the property must be your primary residence.
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Colorado: It offers a property tax exemption for seniors over 65. The exemption amount is 50% of the first $200,000 of actual value of the primary residence. To qualify, you must be 65 or older and have owned and lived in the home for at least 10 years.
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Illinois: It offers a senior citizen homestead exemption of $5,000. To qualify, you must be 65 or older and the property must be your primary residence.
Disability exemption: Individuals with disabilities may be eligible for exemptions. These often provide relief based on the degree of disability and income.
Here are a few examples:
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Florida: It offers a $500 exemption for homeowners with total and permanent disability. To qualify, you must be a resident of Florida and provide proof of your disability.
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Texas: It offers a disability exemption of $10,000. To qualify, you must be unable to engage in gainful employment due to a physical or mental disability.
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Georgia: It offers a disability exemption (amount varies by county) for homeowners with a total and permanent disability. To qualify, you must provide proof of your disability.
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South Carolina: It offers a homestead exemption for persons who are totally and permanently disabled. The exemption amount is based on the assessed value of the home. To qualify, you must provide proof of your disability.
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Illinois: It offers a disabled persons' homestead exemption of $2,000. To qualify, you must be disabled and the property must be your primary residence.
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California: It offers a property tax exemption for disabled veterans and homeowners who are blind or disabled. The exemption amount varies. To qualify, you must provide proof of your disability.
Veterans exemption: U.S. military Veterans may be eligible for exemptions that reduce or exempt bills. Spouses and dependents of deceased Veterans may also qualify for these benefits in some states.
Here are a few examples:
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Florida: It offers a $5,000 exemption for honorably discharged veterans who are Florida residents. Also, veterans with a service-connected disability of 10% or more qualify for an additional exemption.
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Texas: It offers a veteran's exemption of up to $12,000. To qualify, you must be a Texas resident and have served in the U.S. military.
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Georgia: It offers a veteran's exemption (amount varies by county) for honorably discharged veterans. To qualify, you must be a Georgia resident and provide proof of your veteran status.
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South Carolina: It offers a homestead exemption for veterans who are totally and permanently disabled. The exemption amount is based on the assessed value of the home. To qualify, you must provide proof of your disability and veteran status.
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Illinois: It offers a disabled veterans' standard homestead exemption. To qualify, you must be a veteran with a service-connected disability.
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California: It offers a property tax exemption for disabled veterans. The exemption amount varies. To qualify, you must be a resident of California and have a service-connected disability rating of 100%.
Property tax relief programs
Property tax relief programs may offer qualifying individuals property tax credits, deferrals, or rebates to manage their property tax obligations. Nonprofit organization AARP estimates that more than 9 million people in the U.S. are eligible for some form of property tax relief.
BEWARE. There are a lot of property tax relief scams and unsolicited offers out there. Scammers may ask for personal information and use high-pressure tactics, promising to reduce or eliminate your property taxes for a fee.
AARP offers a free resource, Property Tax-Aide, to help older adult homeowners find legitimate relief programs.
Freeze programs
Property tax freeze programs offer relief for older adults or those with disabilities that are facing financial hardship. These programs prevent increases in property tax bills.
- Also, while not a freeze program, some states have property tax caps limiting the amount property taxes can increase in a specified period.
- However, as Kiplinger has reported, terms and conditions and cap types vary.
For example: New Jersey offers a "senior freeze program" mailing millions of dollars in property tax reimbursements to eligible older adult residents.
Property tax appeal
You may want to consider appealing your property’s assessed value. Assessments can sometimes be inaccurate or outdated, resulting in higher-than-necessary tax burdens. You will want to gather the necessary data to support your case, such as:
- Gathering evidence on recent comparable sales or property conditions, you can make a case for a lower assessed value and, possibly, a lower tax bill.
- Checking local rules, including deadlines, for appealing your bill.
Relocating to places with low property tax rates
Moving to a different area with lower tax rates or more favorable tax policies could be considered.
Some states offer tax incentives to attract new residents.
Here are a few examples:
According to the Tax Foundation, some states with relatively low effective property tax rates this year include Alabama, Colorado, Hawaii, Louisiana, and Wyoming.
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Florida: It has no state income tax, estate tax, or inheritance tax. This is appealing to many retirees and high net worth individuals.
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Texas: Like Florida, Texas has no state income tax. This can be a significant draw for individuals and businesses.
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Nevada: It has no state income tax and a relatively low property tax rate. This can be attractive to both individuals and businesses.
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Wyoming: It has no state income tax, no estate or inheritance tax, and a low sales tax rate. This can be appealing to many individuals and businesses.
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South Dakota: It has no state income tax and no inheritance tax. This can be attractive to retirees and high net worth individuals.
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Alaska: It has no state income tax and no sales tax. This can be a significant draw for individuals and businesses.
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New Hampshire: It has no state income tax and no sales tax. However, it does have a tax on interest and dividend income.
Remember that lower tax rates do not necessarily translate to lower tax bills. And of course, when deciding to move, living expenses, amenities, family obligations and quality of life are key considerations.
Limiting home improvements
Homeowners might reduce taxes by avoiding large home improvements. Property taxes are based on assessed values, which can increase with major renovations or additions. Other considerations include:
- Some areas offer tax incentives for properties that remain within certain improvement thresholds, and
- Homeowners might avoid over-improving their homes which can lead to property tax savings over time.
Homeowners should proactively manage property tax obligations as rates continue to rise and consider property taxes as part of your overall financial and retirement wellness picture. Knowing your options can help you achieve this goal.