If you ever browse home listings on Zillow or similar sites – and drill far enough into them to see tax records on those properties – you may occasionally come upon something weird like this:
This is a clear sign of a smart citizen taking advantage of a Property Tax Exemption — one of the juiciest tax cuts out there for those who can get it. So how does one get it?
The basics of property tax exemptions
Real estate tax is generally set at the local level and determined by your home’s value. So, all else being equal, the base amount you owe as a homeowner depends on three key variables:
- The county you live in (or city, in some cases);
- The current assessed value of your home;
- How often your home is re-assessed.
But there’s a fourth variable that can potentially reduce that base amount: you. In many counties throughout the US, you can get a reduction on the real estate taxes you owe if you meet certain criteria. In our home of King County, for example, there are two main ones:
- You must be one or both of the following –
- Age 61 or older
- Disabled or a disabled veteran
- Your income must be under a certain threshold –
- $58,423 for an exemption on 2020-2022 taxes
- $40,000 for an exemption on 2019 taxes
There are some other niche qualifications and exceptions too, but I’m trying to keep this short-ish. And yes, in case you were wondering – these exemptions can be granted for previous tax years too (at least in King County). In that case, you would be awarded either back-pay or a credit toward next year’s RE taxes.
An important caveat
Because property tax is set locally, the exact amount and requirements for an exemption will vary with your city or county regulations. As in King County, however, income is a major criterion in many places. But this doesn’t just mean taxable income – it’s ALL income!
For example, if you receive $30k annually in Social Security, only $12k of that may be taxable – but all $30k is factored into your income eligibility. Similarly, rental income is calculated as all rents received – less related expenses (like maintenance or property mgmt. fees) but before depreciation.
All these considerations may seem daunting… but I can personally attest to their value. They’re key to the retirement income strategy for several of my clients, for example, as we try to plan their low-income years to coincide with applying for this tax break.
So if you think you or a loved one may be eligible for this exemption, start looking into it! Get in touch with your county assessor’s office, or just Google “property tax exemption” with the name of your city or county. If nothing else, these links make a good starting point:
Your pocketbook will thank you heartily if it turns out you are eligible – and even if you aren’t, it’s always good to know you’re not missing out on something.