Property Tax Exemption
What is a property tax exemption?
Updated April 25, 2022
Property taxes are a reality for all homeowners, and can become a source of stress as they fluctuate over time. Because property taxes are calculated based on the assessed value of a home, these taxes can increase as the property’s value also goes up.
But some homeowners can find relief in the form of property tax exemptions, which excuse them from paying a portion—or even the entirety—of their annual property taxes if they qualify.
Property tax exemptions excuse homeowners from paying a portion of their property taxes, or, in some cases, the entirety of them. Credit: Leon Dewiwje/Unsplash
Note the distinction between a property tax deduction and a property tax exemption. A property tax deduction allows homeowners to write off a portion of their liability when they file their annual taxes. An exemption, on the other hand, exempts homeowners from paying a percentage or all of their property taxes.
Who is eligible for a property tax exemption?
Nonprofit and governmental organizations, as well religious institutions, are exempt from paying property taxes. Some individuals can take property tax exemptions as well, including senior citizens, veterans, and low-income individuals.
How to find out if you’re eligible for a property tax exemption
Consult state and local tax websites or speak to a tax professional to find out if you’re eligible for any property tax exemptions. Keep in mind you may qualify for more than one.
Types of property tax exemptions
- Senior citizen tax exemption: Homeowners who have reached a certain age are often eligible for an exemption. Note that this varies by state. New York state, for example, offers seniors 65 and older a reduction on the taxable assessment of their home of up to 50%. New York state localities can opt to offer further exemptions based on income. Homeowners can file applications for these exemptions through the state Department of Taxation and Finance.
- Veteran tax exemption: Veterans who served in the U.S. Armed Forces may also be eligible to take an exemption depending on the state and locality they live in. The exemption can range from a portion of their property’s value to its entire value. In New York state, for example, veterans must provide proof of their service and that they were honorably discharged; they can submit applications to their tax assessors.
- Disability exemption: People with disabilities may be eligible for exemptions, again depending on where they reside. Some localities will require documented proof of disability, as well as have specific income requirements. New York state, for one, allows a 50% reduction in the assessed value of a property. (People with disabilities may also be able to take tax reductions for the costs of accommodations to their home, such as the installation of a wheelchair ramp.)
- Homestead exemption: This exemption allows those whose property is their primary residence to protect an amount of its value against taxation, and varies significantly by state. As with other exemptions, homeowners should consult state and local tax authorities, as well as tax assessors, for more information. Here’s how it can be used:
- Protection against creditors: If a homeowner dies, this exemption could protect their spouse’s equity in the home from creditors or provide them with tax relief. Note, though, that this exemption does not prevent the home from foreclosure if the owner defaults on mortgage payments.
- Bankruptcy protection: This exemption may allow a homeowner who declares bankruptcy to keep their home or protect some of their property from creditors. These protections vary based on the homeowner’s state, the amount of equity they own in the home, and the type of bankruptcy they file for.
For more on property taxes, check out Mansion Global’s weekly Tax Talk column.