Who Qualifies for Property Tax Exemptions?
If you own real estate in the United States, the first tax you are subject to will be the U.S. Property Tax. However, in certain situations, it is possible to reduce - or even eliminate - this tax through property tax exemptions.
Personal Property
Basically, all real estate and personal property are taxable unless specific exemptions are established. There are different types of exemptions.
The use of property (e.g., a property used for religious or charitable purposes);
and the form of ownership of the property (e.g., household goods).
Local and state governments use the exemptions to help attract new businesses and promote certain types of development, such as affordable housing for low-income people or the recovery of historic sites.
The Eligibility
There may be full or partial property tax exemptions. One municipality may provide a total exemption for personal or corporate property, while another may offer only a partial exemption for these types of assets. Landlord exemptions are an example of this.
Limitations can be expressed in terms of monetary sums or in a percentage of the value.
There are other forms of exemptions for the following:
Certain municipal levies
Purposes of a school, municipality, city and county
Government ownership (required by state laws)
People over 65 years of age
Veterans
The average American homeowner pays about $2,971 in property tax.
Of course, between each state, this amount can vary greatly and we will understand these differences through the operation of this tax.
The Calculation
How is the property tax calculated in the United States? U.S. property taxes are paid annually or in installments. The state establishes the guidelines within which the region or municipality may impose property taxes. The method of calculating the property tax takes into account the value of the land and the value of the building. This tax is collected by the region, whether called the county or by the municipality.
The money collected is intended to finance:
- security,
- education for the construction and renovation of schools
- and for any public infrastructure project.
Like any tax it is a duty of any American citizen, it therefore results in an obligation to pay the property tax within the legal deadline. Failure to comply may result in the charging of late payment penalties.
Primary Residence
Several conditions are necessary to be able to claim an exemption from property tax. The law provides that persons benefit from an exemption from the property tax relating to their main residence if they occupy it either alone (or with their spouse), or with persons counted as dependents for the calculation of income tax, or with persons whose reference tax income does not exceed a certain threshold i.e. with persons who are in receipt of the same allowance as them.
Income Conditions
Persons holding a mortgage and persons over 75 years of age on 1 January of the tax year may also benefit from an exemption from their property tax. However, in addition to the conditions of cohabitation mentioned above, they must meet income conditions. Indeed, the amount of the reference tax income that appears on their last tax notice must not exceed a certain threshold. This limit varies according to the number of family quotient shares to which they are entitled.
The Location
An important issue related to property tax laws deals with the location of the property (or its "site") for tax purposes. If a taxpayer has property in more than one area or if they have movable property, such as a vehicle or trailer, it can be difficult to establish the most appropriate location for determining the tax on those assets. Since laws can vary so much from place to place, this issue is often controversial.
The States
Each locality - and therefore each state in the United States - imposes a different property tax rate: two identical houses a few blocks apart can have a very different tax rate.
For example, the highest average rate is in New Jersey and the lowest is in Hawaii. In the state of Texas, applicants can apply for the exemption through a housing waiver. However, the county is the entity that grants the exemption. More importantly, the kind of relief varies from one resident and location to the next. For example, in some areas in the city of Dallas, the exemption is 20%, which means that the value appraised will be reduced by the same amount, specifically for tax reasons. If your home is valued at $100K, you will only pay taxes on the $80K. Some areas in the state of Texas have a fixed exemption, no matter the cost of the home.
You should always check your district to know the kind of valuation used to make the determination. In most localities, those with a disability and those residents over the age of 65 do receive additional benefits.
The Property Value
Once the value of the property is established, the locality applies classifications to determine the assessed value. The tax rate varies according to the use of the property and the status of its owner.
In Florida, for example, the owner receives a taxable value relief on the first $50,000 of the value of the property – if the property is held as a principal residence (Homestead exemption). Also, in Florida, the owner is entitled to tax deductions if he is over 65 years of age, or if he is disabled or if he is a veteran (Military Veterans). In addition, in Florida, the tax increase is capped at 3% constitutionally.
Conclusion
So to recap, to be eligible for property tax exemption, this must be a primary place of residence. To qualify for this exemption, you would have to own the home from the 1st of January of the same tax year.
Therefore, if you bought the house in July of that tax year, you would have to wait until the following tax year to apply for the exemption.
Choose the right location to benefit from advantageous taxation! By taking the time to choose the locality of your property, you will be able to minimize your property tax. This tax is often higher for a property in the city or a property close to well-funded schools. If you want to know more about property tax exemptions, go on over to the Goalry platform and head to the Taxry store.
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