What Are 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:
Calculating Property Taxes
- The local government assesses your property to determine its value.
- The local property tax rate, known as a millage or mill rate, is applied to your property’s assessed value to determine how much tax you owe. This determines your tax liability.
- The tax collector factors in any exemptions you qualify for before defining your total property tax liability.
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.
Property Tax Exemptions vs. Deductions
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.
Who Qualifies For Property Tax Exemptions?
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.
Homestead Exemptions
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.
Property Tax Exemptions for Veterans
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.
Property Tax Exemptions for the Disabled
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.
Age-Related Property Tax 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.
Tax Exemptions for Other Types of Property
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.
How To Claim a Property Tax Exemption
If you think you may qualify for a property tax exemption, there are certain steps you must take to claim it.
- Confirm Your Eligibility
- Check with your state and local tax authorities to make sure you meet all the qualifications for the exemption you want to claim. You should also find out what documentation you need to provide to file for the exemption.
- Gather Required Documentation
- Depending on which exemption you want to claim, you’ll need documentation to prove your eligibility. Required documentation might include proof of residency, income statements and application forms. Make sure you have these documents with you before you file your application.
- Submit Your Application
- Once you’ve determined your eligibility for the exemption and gathered the necessary documentation, you should apply for the exemption through your state or local tax authority.
How To Claim a Property Tax Exemption
Claiming Multiple Exemptions
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.
