Property Tax Exemptions

If you own a home, land or other real estate, you pay property taxes based on the assessed value of your property. Some states also collect personal property taxes on “movable” property such as cars, boats, RVs and mobile homes.

Property taxes are calculated differently depending on the state and county you live in, but most follow a general tax calculation procedure:

A property tax exemption allows a taxpayer to waive payment of some or all of their property taxes. Individuals may be granted these exemptions based on certain qualifications.

If you’re looking to reduce your tax liability, you may know tax deductions — but these differ from exemptions. Property tax exemptions subtract a set amount from your tax bill, while tax deductions are subtracted from your taxable income. You apply deductions when you file your yearly tax return.

Claiming property tax exemptions and deductions can both positively affect a homeowner’s overall personal finance health by reducing their total tax liability.

But there are limits on property tax deductions that can affect your overall deductions as well. Your total combined deductions, from property taxes to sales taxes and deduction of state and local income, cannot exceed $10,000 according to the IRS.

Because property taxes are levied at the state and local levels, the specific exemptions you may qualify for depend on where you live. There are a few categories of exemptions that are common across the country.

Most states offer some variation of homestead exemptions for property owners. These exemptions protect a portion of a home’s equity, which is the home’s assessed value, from being taxed.
By decreasing the taxable value of the home, homestead exemptions can lower a homeowner’s tax liability by a set amount.

For example, if your home is assessed at $300,000 but you qualify for a $50,000 homestead exemption, you will only be taxed on $250,000.

In general, you can only qualify for a homestead exemption on the home that serves as your primary residence. You must be able to prove that you lived there as of Jan. 1 to qualify for an exemption in that tax year.

The exemption is available to all homeowners in some states, while other states limit who can claim the exemption based on eligibility requirements like age or income. Check with your county’s tax collector’s office for more information on your exemption status.

Certain demographic groups can qualify for property tax exemptions depending on state and local tax provisions. Exemptions for veterans are common across the U.S.

The majority of states offer some form of property tax exemption for disabled veterans, and some states — like New York — offer exemptions for veterans regardless of disability status. The eligibility requirements for these exemptions vary widely by state.

For example, 100% disabled veterans in Iowa and Florida receive full property tax exemption while veterans in New Jersey can only receive a $250 exemption — regardless of their level of disability.

If you are permanently disabled, you can typically expect to qualify for tax relief for some portion of your property taxes.

Qualifications for disability-related exemptions vary widely depending on location. In Florida, a resident who has been certified by a Florida licensed physician as being permanently disabled — but not requiring the use of a wheelchair for mobility — can qualify for a $500 Disability Exemption on their property’s assessed value. If that same person were a resident of Texas, they could qualify for a $10,000 property tax exemption.

Be sure to research your municipality’s tax codes to see if you qualify for any available exemptions.

Some municipalities offer exemptions for older homeowners, but the minimum age required to qualify for this exemption varies by locality. Typically, these age-related exemptions are only for homeowners over age 65.

These types of exemptions often require other components besides age, such as income restrictions and residency requirements, in order to qualify.

Aside from exemptions based on demographic requirements of homeowners, there are other property tax exemptions based on the type of property you’re claiming the exemption for.

These include exemptions for religious properties, government-owned properties and properties owned by nonprofit organizations and charities.

If you think you may qualify for a property tax exemption, there are certain steps you must take to claim it.

In some states, you can claim multiple exemptions if you meet the qualifications for each exemption. Your local tax collector’s office can help you determine whether you’re able to claim multiple exemptions or combine your exemptions to save even more money on your tax bill.

Consider working with a CPA or other tax professional who can help to ensure you’ve completed the application accurately and claimed all of the exemptions you are eligible for.