Property Tax Exemptions: What You Need To Know
It’s a fundamental rule of real estate: Virtually everyone who owns a piece of property must pay taxes to the government on a regular basis. These property taxes, which are levied by your county or local taxing authority, are based on the assessed value of your home.
Of course, the amount of property taxes that you owe can change from year to year along with the value of any single-family home, apartment, condo, townhouse or other real estate holding that you own. Property tax exemptions can provide significant cash savings by excusing you from a portion of your property tax bill.
Note that property tax exemptions also differ from tax deductions in that they allow select homeowners to avoid property tax bills entirely.
What Is A Property Tax Exemption?
Most homeowners pay annual property taxes on the value of real estate holdings that they own. But certain property types, such as those owned by religious organizations or government bodies, are exempted from all property taxes. Individuals may likewise be exempted from paying a portion of their property taxes due to their status as a veteran, disabled party, senior or various homestead exemptions.
In effect, the majority of property owners should expect to have to pay property taxes, which can impact their annual budget and monthly expenses. However, the government has also created several property tax exemption programs designed to help real estate owners lower or eliminate their property tax bill.
Of course, while property tax exemptions (also known as real estate tax exemptions) may help you garner thousands in prospective tax savings, not all individuals will be eligible to capitalize on them.
What’s The Difference Between A Property Tax Exemption And A Deduction?
A property tax exemption is a portion or a full tax amount that you don’t have to pay. Property tax exemptions differ from property tax deductions in that they allow eligible parties to outright avoid large chunks of property tax bills.
Governments issue tax deductions to help homeowners lower their tax bills. They issue tax exemptions as a way to waive a certain percentage of taxes in their entirety – and enterprising homeowners should capitalize on these benefits.
A property tax deduction just limits your overall tax liability so that you’re still paying the tax, but you’re limiting the amount of income or property value that you have to pay the tax on.
Who Is Exempt From Paying Property Taxes?
Certain types of properties and individuals may qualify for property tax exemptions based on their specific situation and status. Nonprofit, religious or government properties may qualify, along with senior citizens, veterans, low-income individuals or disabled persons.
Here’s a closer look at these exemptions and the individuals that qualify for them.
A homestead exemption, available in most states, allows you to safeguard a certain amount of your property’s value from taxation, provided that the home is being used as your primary residence. This exemption can also protect the value of the property from taxes or creditors that arise following the death of a homeowner’s spouse and ensures the surviving spouse has shelter.
Depending on the state you live in, you may be eligible to exclude either a flat-rate amount of your home’s value from property tax assessments or a percentage of its overall value. Note that the amount of any homestead exemption can vary widely by state and may be available in larger amounts for married couples and joint owners. Some states offer no homestead exemption whatsoever.
Be advised that vacation and investment properties do not qualify for homestead exemptions under any circumstances.
States frequently provide tax exemptions for homeowners once they have reached a certain minimum age as well. Individual particulars of these programs vary by state and geographic area and may come with various income restrictions and residency requirements attached.
Be sure to do your research regarding them, especially as you may qualify for significant savings. Some states do not allow seniors to eliminate exempted taxes entirely, but rather temporarily defer these payments until such time as the property is sold.
Exemptions For People With Disabilities
Individuals who have a disability may be eligible to receive tax relief on a certain portion of their property taxes, with specifics of underlying programs again varying widely by state.
If you’re looking for handy tax-saving vehicles, certain expenses may help you reduce taxable earnings. For example, select home renovations that assist you and provide greater mobility, such as adding a ramp or chair lift for easy access, may qualify as tax deductions or provide you with helpful tax credits.
Again, do your research, as policies can vary widely among regions. But if you have a disability, it’s reasonable to anticipate that you may be eligible to obtain relief on at least some portion of your property taxes.
Exemptions For Veterans
Military veterans and active service members may also qualify for property tax exemptions depending on the state in which they reside. Savings opportunities, which can be significant, are often provided in the form of waivers that exempt you from having to pay a portion of or even the entirety of your property taxes.
As you might imagine, these coveted benefits can quickly provide thousands in potential tax savings.
In certain municipalities, you may be exempt from residential property taxes if you’re a low-income earner. Check local and state laws.
Other Available Exemptions
Additional opportunities for tax exemption may also be extended with regard to:
- Renovation projects
- Energy incentives
- Surviving spouses
- First responders
How To Get A Property Tax Exemption
Think that you may be eligible to claim a property tax exemption? Be sure to review the information below.
Check Your Eligibility
To confirm your eligibility for a property tax exemption, you will want to check with your local and state government and taxation authorities. Likewise, veterans and service members should speak with the Department of Veterans Affairs (VA).
Explore Your Local Options
To determine what local property tax exemptions are available to you, you can visit the website of your state and county’s department of taxation and finance, department of revenue, comptroller or assessor. Likewise, you may want to phone their offices and consult with a qualified tax professional for guidance.
Apply Before Your State’s Deadline
If you’ve determined that you are eligible for a property tax exemption, make a point to file your paperwork as soon as possible. Your state or local tax collector or department of revenue’s website can help you determine when your exemption application is due. The sooner you submit the application, the better, as you could save thousands by filing these documents.
Claiming More Than One Property Tax Exemption
If you qualify for more than one property tax exemption, you may be able to claim more than one, depending on where you live. Most states offer multiple forms of property tax exemptions, and many will allow you to combine them.
However, in some states you will be limited to just one property tax exemption. It’s important to check the regulations on your state’s tax revenue website before submitting multiple claims. Your local tax collector’s office can also assist you in determining which exemptions can be combined.
The Bottom Line: Property Tax Exemptions Can Save You Money
Your monthly mortgage payment doesn’t just include costs related to payment of loan principal and interest, but property taxes and homeowners insurance as well – meaning that as property taxes go up, so too can your monthly bills.
Noting the potential impact of property taxes on mortgage payments, you’ll want to capitalize on any property tax exemptions that you are legally entitled to, given the significant financial windfall that they can provide.
Interested in learning more about property taxes? Check out this article on property tax by state to find where your state lands on the list.