Everyone who owns property must pay property taxes. Although there is nowhere to go to escape paying these taxes as each state requires property tax payments, there are certain property tax reductions and deductions to lower your property tax payments. These adjustments are primarily based on age, income level, and location.
Property Tax Basics
Property taxes are taxes collected on owned land, property additions, structures, and moveable objects. These taxes are assessed by county, state, and local governments.
Property taxes are the largest source of income for the state and local governments and can even produce more revenue than the combination of both sales and income taxes. The property tax that each homeowner pays provides important revenue for public services, including public schools, the fire department, libraries, and parks.
Property tax is determined by the type of property—residential, commercial, or industrial—and the property’s assessed value. Approximately every four years, your property’s value is revaluated by an appraiser who will provide you with the most accurate value for the property tax.
Property Tax Reduction
Property tax reductions are based on the total household income for the previous calendar year. In order to qualify for a property tax reduction, there are a list of criteria and qualifications, including having a total household income of $28,000 or less after deductions, and meeting at least one in a list of criteria, including being 65 or older, a widow or widower, blind, a former prisoner or war, a veteran receiving VA pension, disabled, or being a fatherless or motherless child.
There are three main types of
property tax reduction programs: an annual property tax rebate, abatements, and exemptions. The annual property tax rebate provides a tax refund in order to offset a portion of the tax already paid. Property tax abatements provide a reduction in the amount of tax that is due. The abatement may be based on a reduction in the taxable property’s assessed value. Abatement may be provided if there is an overvaluation or disproportionate assessment of the taxable property, or a statuary exemption.
A property tax exemption provides tax relief for an individual or organization—such as a nonprofit organization or a church—which falls within a class that the government chooses to promote through economic means. This type of property tax reduction reduces a property’s taxable assessed value. To qualify for a property tax exemption, the taxpayer and the owned property must meet various qualifications, including the taxpayer’s age and income level, public service performed, and type, value, and location of the property.
Property Tax Deduction
Property tax deductions are expenses on a home loan that the federal government allows homeowners to deduct from their income before computing their income tax. These deductions are typically provided to those who are of a certain age, are disabled through being a veteran or otherwise, or fall within a specific income bracket.
There are a variety of different
property tax deductions. The mortgage deduction deducts a specified amount from the property’s assessed value. In order to receive the deduction, the homeowner needs to bring in a copy of the mortgage upon application. An exemption for those who are blind or disabled will provide a property tax deduction as long as there is proof of blindness or disability and the annual income is less than $17,000. The over 65 age deduction provides a deduction if all of the tenants are over the age of 65, currently live on the property or in a nursing home, and fall within a specific income bracket. Another property tax deduction provides for disabled veterans provided the veteran receives an abatement slip from the Veteran’s Administration.
Property Taxes by State
Property taxes and their due dates vary by state. Although each state requires property taxes, certain states have lower rates than others. Many states provide tax breaks based on age, income, or location. In recent years, a small handful of states have cut property taxes and relied on income and sales taxes to make up the difference.
Be sure to look into property tax reductions and deductions if you fit the requirements to
lower your property tax payments. If you are planning on moving to another state, it is important to research the property tax rate so you can adjust your budget and make sure you can afford the change in taxes. Remember that even though property taxes may be lower or higher in different states, the sales and income taxes fluctuate based on the property tax to provide appropriate income for the local and state governments.