Here's the thing. The state, county, or city agency that collects your property taxes usually won't tell you that you qualify for an exemption. You need to find and apply for property tax exemptions offered in your area. Check the websites of tax agencies in your area to find out what tax relief is available.
Nobody likes paying a dime extra in taxes. But when it comes to property taxes, you could pay too much if you don't know you qualify for an exemption.
You might spend a few hours doing the research and the paperwork, but you could lower your tax bill enough to make it worth your time.
Here are five of the most common types of property tax exemptions:
Homestead exemptions keep you from paying tax on a portion of your home value. For example, in Alaska, homeowners who are 65 or older don't pay taxes on the first $150,000 of assessed value for a primary residence.
Some states tie the homestead exemption to income level or other criteria. Each area has its own rules and deadlines for applying. Some require you re-apply each year.
#2 Seniors and The Disabled
Many states offer property tax exemptions to older homeowners and the disabled. Colorado exempts 50% of the first $200,000 of the actual value of your home for seniors and disabled veterans.
There are age, income, and residency restrictions, so it's smart to read the fine print. A homestead exemption aimed at seniors may only defer property taxes until the home is sold. And don't assume exemptions for seniors kick in at 65.
- Washington state reduces property taxes for homeowners the year after they're 61.
- Nashua, N.H., increases the amount of the senior exemption as you age. When you turn 65, you get a $192,000 exemption. That increases to $224,000 when you turn 75, and $280,000 when you turn 80.
You'll need to show proof of disability, like eligibility for Social Security disability benefits, to get a property tax exemption.
#3 Military Veterans
Many states offer property tax exemptions to veterans if they:
- Use the home as their primary residence
- Served during wartime
- Were honorably discharged
Some states offer property tax exemptions to all veterans, even those who served during peacetime. Others, like Pennsylvania, target disabled vets.
You may need to meet other requirements, like the length of residency or income restrictions. Parents and widows of disabled service members may also get property tax exemptions.
If you make home improvements, check for property tax breaks like these:
- In Cook County, Il., you can make up to $75,000 in home improvements without paying taxes on the increased home value for up to four years.
- In Pierce County, Wash., you can get a three-year exemption for home improvements up to a certain percentage of your assessed value.
Check with your tax assessor's office before you knock down a wall, though. You may need to apply for the tax exemption before you start work.
#5 Energy Incentives
Installing renewable energy systems in your house could pay off on your property tax bill as well as your energy bill. Some states exclude the value of certain green improvements from a home's real estate assessment.
Eligible upgrades may include the installation of solar panels or geothermal heat pumps.
Look for information on state and local property tax breaks for renewable energy systems on the Database of State Incentives for Renewables & Efficiency.
#6 Other Exemptions
A visit to your local tax assessor’s office may turn up other less common property tax exemptions.
- Smithtown, N.Y., exempts property you build or renovate to give a grandparent a home.
- Some counties in New York state reduce the assessed value of the homes of volunteer firefighters.
- Some states offer widow/widower exemptions. It doesn’t hurt to ask if yours does.
Are Exemptions Worth the Effort?
The U.S. median property tax paid is about $2,000 annually, or about 1% of the $200,000 median home value. Savings from exemptions will vary widely depending where you live, the value of your home, and what you qualify for. A 15% exemption would save about $300.
This article provides general information about tax laws and consequences, and shouldn’t be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice.