If you're a property owner in the United States, then you're no stranger to the concept of property taxes. Largely considered a necessity at the local and county level to keep operations running, these taxes most commonly deal with real estate. Though it's everyone's responsibility to pay their share of taxes, there are legal methods that people use to reduce their tax liability. Property taxes—and the associated assessment they're based on—are no exception.
If you're staring down an upcoming property assessment, you'll want to ensure it's as accurate as possible. To that end, we've gathered some of the more common property tax exemptions that may apply to you.
- Depending on how often your state or municipality requires a tax assessment, how much you pay could fluctuate over time.
- Like most taxes, there are certain scenarios in which how much you owe can be reduced.
- Make sure you don't miss your deadline to appeal—reach out to local, county, and state taxation offices to find out when and how to rebuff your assessor's determinations.
What Are Property Taxes?
Often considered the financial backbone of local government, property taxes are generally levied by your municipality, county government, and in some cases, your local public school system. When collected, they help pay for your community's needs, such as emergency services, trash collection, and public libraries, to name a few.
Property taxes are what's called an ad valorem tax, which is considered by some circles to be a regressive tax, which means it's based on the assessed value of a property. How much you'll pay in property taxes will depend on several factors and varies between municipalities. Furthermore, some municipalities may levy taxes on more than just real estate, instead opting to include other tangible personal property, such as vehicles or furniture.
What is a tax assessment?
In order to calculate how much a property owner must pay in property taxes, the assessed value of the property in question must first be determined. Depending on where you live, that value could be determined by having a tax assessor physically visit the property to determine its value, though that's not always the case. Some jurisdictions assess properties based on their market value, while other locations multiply the market value with an assessed rate to find the final assessed value.
Along with any exceptions, which we will address below, the assessed value of a property is dependent on the local property tax rate, as well. A property tax rate, also known as a mill rate, is multiplied by the final assessed value of the property in order to come to the property tax bill.
How often these assessments take place also depends on where you live. In many locations, such as Arizona, California, and West Virginia, tax assessments occur every year. However, in many other states, the frequency with which tax assessments take place can be as long as 10 years, or entirely at the discretion of the municipality. You should make sure you know when your assessments will take place in order to properly seek certain exemptions. Ideally, property tax assessments should take place on an annual basis so you're only paying typically they're locally determined.
When can you appeal a tax assessment?
No one wants to pay more in taxes than they should. If you're certain that your property taxes are too high, you can appeal your property tax bill. Typically, you will have a predetermined amount of time after receiving your property assessment or tax bill for which you'll be able to argue that the assessor's determination was wrong.
Like nearly every other aspect of the property tax conversation, the process by which you would go about appealing your property taxes varies from state to state, county to county, or even municipality to municipality. For example, property owners in Marion County, Oregon, are required to file their appeals after receiving their tax statement but before Dec. 31. Meanwhile, taxpayers in Wake County, North Carolina, have 30 days after receiving their initial notice of value to appeal.
Keep in mind that you won't get an immediate response to your appeal. It will take time to fill out the appropriate paperwork and pay any associated fees in order to even begin explaining why you believe your property is actually worth less than the assessed value. Again, what that process looks like will be determined by where you live. Even then, it could take a while before you hear back from whichever agency handles your property assessments because they are likely slammed with other assessment appeals at the same time.
Property Tax Exemptions Can Help Lower Your Taxes
Property taxes can be a costly annual expense. Though a small reduction in your assessment could end up only saving you a few hundred dollars over the course of a year, if you can successfully argue that your property was grossly overassessed, you could easily end up keeping thousands of dollars in your pocket.
Though you can't argue the tax rate, another way you can reduce your property taxes is by seeking and arguing for certain exemptions. Though certain exemptions, like those for religious or government organizations, are out of reach for the average property owner, the following exemptions could fit your needs and help reduce your property tax bill.
Property tax exemptions for seniors
In many states, home and property owners above a certain age can receive a property tax exemption. The specific details regarding the cutoff age and other eligibility requirements, such as Social Security status, may also play a part. Furthermore, there may be some additional requirements or other criteria. This kind of exemption could be a lifesaver for many senior citizens because 4.9 million Americans ages 65 and older were living in poverty as recently as 2019.
Veterans property tax exemptions
For those who served our country in the military, many states and municipalities offer property tax exemptions, among others. Whether or not the exemption is available for disabled veterans or anyone who served in the armed forces depends on the state. How much this exemption can deduct from your overall property tax bill also depends on where you live. For example, California offered a basic exemption amount of $134,706 in 2018. Other states offer to completely eliminate property taxes for former armed forces members.
If you have a primary residence and want to reduce the overall property tax bill associated with that residence, you may be able to apply for a homestead property tax exemption. Depending on where you live, you may not even have to fall within a certain subset of citizens to be eligible because some states actually offer the exemption to every homeowner. However, most states often require that you be:
- A disabled individual
- An elderly resident
- A veteran
- Or a disabled law enforcement official or first responder
Some homestead exemptions are based on a flat value reduction of all of the taxable value of your home. Other instances of the homestead property tax exemption are calculated by a percentage. The former, lower-valued homes receive a larger reduction, while the latter is a better choice for people with high-value properties.
Exemptions on home renovations
Though most renovations can actually increase your property taxes thanks to their higher valuation, some states offer exemptions for renovations up to a certain dollar amount. Depending on where your property is located, some parts of the country offer to waive property taxes for up to a certain amount of home improvements. In these instances, local governments will set the limit on how much money you can put into a property before you return to paying the full tax amount.
Renewable energy exemptions
If you're looking to add to the global push for more green energy and less waste, you may be able to take advantage of some additional property tax discounts. Installing things like solar panels on your roof could not only lower your energy bill but also earn you a property tax incentive in the process. In some cases, this is done by reducing your property assessment by the value of whatever improvements you added to the home. Though solar panels are typically a more common method of generating renewable energy throughout the country, some states may also provide exemptions for geothermal heat pumps and wind power.
To see whether your state and municipality offer such an exemption, you can search for any potential benefits on the Database of State Incentives for Renewables & Efficiency.
Exemptions for the disabled
Homeowners living with a disability are likely to be eligible for a property tax exemption. How much relief your disability will garner you when it comes to property taxes depends on where you live. In some cases, you'll have to provide a legal affidavit to explain your disability. Still, if you're having a hard time moving around and living on a single, fixed income, a reduction in your property taxes could be a huge step in the right direction for you financially.