Property taxes are a significant source of funds for county governments, which have seen their revenue generating power decline substantially in the past several years due to the same harsh economic forces that have been gripping consumers. Senior citizens, particularly on a fixed income, are among the worst hit by rising property taxes, and a senior citizen property tax exemption sometimes can become a lifeboat without which senior citizens can sink. The laws governing a property tax exemption vary from jurisdiction to jurisdiction, and eligibility requirements are also different. For example, Allegheny County in Pennsylvania have a base age eligibility requirement of 60 years, whereas most jurisdictions use 65 as the minimum age requirement. Therefore, it is highly advisable for senior citizens to check with their county’s assessor’s office for eligibility restrictions, such as residency or income.
Four main forms of senior citizen property tax exemption:
- Homestead exemption: A portion of the assessed home value is tax exempt, resulting in a lower tax bill, or with the case of the state of New Jersey, homeowners are granted a rebate on next year’s tax bill.
- Property tax circuit breaker: Income is the crucial criteria for this tax break, as the ability to pay property taxes is calculated, with the county or state setting a fixed percentage of income for senior citizens to pay property tax bills with (called the circuit breaker). If property taxes are higher than this percentage, a rebate or credit will be issued.
- Tax deferral: Property taxes are deferred until the property is sold, the homeowner passes away, or the property is no longer the primary residence, then deferred taxes plus interest will be assessed and payment required.
- Tax discount: Certain states, one of which is the state of Washington, takes the discount approach, based on the income of the homeowner, the value of the property, and current tax rates.
The state of New Jersey , which has some of the highest property tax rates in the country, offers an assistance program to senior citizens that keeps their tax rates at a fixed level, which is determined as the year the homeowner becomes fully eligible for the state Property Tax Reimbursement Program, commonly known as the Senior Freeze. This program is also open to disabled persons and surviving spouses.
Under the proposed New Jersey State Budget for Fiscal Year 2013, which is due to be adopted by July 1, 2012, only applicants whose income did not exceed $80,000 in 2010 and did not exceed $70,000 in 2011 (down from $80,000 previously) will be eligible for a reimbursement. All other eligibility requirements still have to be met.
The state of New Jersey also has a $250 property tax deduction for eligible senior citizens 65 years or older. Proof is residency is required, defined having lived at the property as primary residence for at least 12 months prior to October 1 of the previous tax year. Joint annual income is, however, restricted to $10,000.
As senior citizens are fond of pointing out, they are also voters, thus a senior citizen property tax exemption is not likely to eliminated or even substantially reduced any time soon.