Property Tax Help for Low Income Homeowners Explained
Homeowners often experience many financial difficulties throughout life. For instance, property taxes may be too much for many low-income families to afford. This issue could spiral out of control and result in you losing your home. You may also experience credit score loss and much more.
As a result, you must research property tax help for low-income homeowners. You must also understand the varying elements surrounding this topic. So let's take a deep dive into this subject to learn more. Doing so will give you the help you need to make intelligent financial decisions.
Property Tax Help for Low-Income Homeowners
Property taxes often hit many families hard and make life difficult. That's because the government base property taxes not on a person's income but the property's value. And if a home's value increases, the taxes go up. Unfortunately, many homeowners find themselves in an unenviable position here. They could afford the house initially, but the taxes may make their financial situation very tough.
That said, many other situations make property taxes hard to pay. For example, life changes may impact a homeowner temporarily. These changes could make property taxes hard to pay for one year or a season. Unfortunately, missing tax property payments may cause complications with ownership. As a result, it is essential to understand situations that may impact your ability to pay.
Programs That Provide Property Tax Help for Low-income Homeowners
The following programs help people with low income get relief from property taxes. Some cut out a percentage of the property tax to minimize expenses. Others may eliminate property taxes entirely. Check these options below and talk to your state officials to learn more about your options.
Exemptions
Most states provide property tax exemptions for those who qualify. Qualifications vary depending on each state's guidelines. Exemptions work to lower property tax for the primary residence. Typically, they help low-income people but may apply in many situations. A few people who qualify include:
Veterans who may have a limited income or no income after returning
Widowers who were not the primary financial support for a home
Senior citizens with fixed income or retirement money
Individuals with disabilities who cannot work or who work limited amounts
Talk to a tax official near you to learn more about whether you qualify. They'll analyze your financial situation, including your income and debts. Then, they'll decide what kind of exemptions work for you. In this way, you can minimize your property tax payments and avoid financial complications.
Circuit Breaker Programs
States also create programs to help reduce taxes for people with a low income. These programs are called circuit breakers. Each state provides different rules and regulations for each program. These include things like qualifying elements, deadlines, and more. Your state likely has one or more circuit breaker options you can consider for property taxes.
Circuit breakers vary between two different types. These include single thresholds and multiple thresholds. What are the differences between them? The first type applies the same percentage to all low-income homes equally. In other words, it provides one rate for everyone. These types usually require less work to qualify for and few restricting elements.
Multiple threshold circuit breakers provide a variety of different percentage levels. They examine the income level of a home to gauge the savings. This option works well for those with an extremely low cash influx. Usually, lower-income houses get better rates. The overall savings will vary depending on the state, however. For example, eligibility in some states includes people with no more than $6,000, while others provide for those with over $100,000.
HPTAP (Homeowners Property Tax Assistance Program)
We briefly discussed this program type in another section, focusing on Michigan's option. They provide an exemption from property taxes based on household income or circumstance. Homeowners who qualify must apply every year to renew their exemption. Failing to use will result in higher property taxes for the year.
Qualifying is based on income and household members and varies by state. More people in the house raise your exemption level. If you qualify for 100% exemption, you pay no property taxes that year. However, many states provide 25-50% exemptions as well. These exemptions cut that specific percentage from your property taxes. No in-between percentages (such as 28%) exist. You either qualify for 25%, 50%, or 100% exemptions. Even one dollar over the maximum income could send you to the lower exemption level.
You must also calculate your household assets separate from your income. These assets include all property you own, vehicles, boats, and campers. You must also calculate stocks, bonds, IRAs, and any other investment option. Most homes with a low income probably don't have a high number of assets. However, if your assets go over a specific number, you may disqualify for assistance.
How High is This Theshold?
That depends on the state and the year. Updated guidelines help keep these programs current to financial realities. For example, Michigan currently has a $12,000 assets guideline. If you have a low income but assets over $12,000, you do not qualify for this program. Why would you be denied in this circumstance? States have a unique perspective on this idea.
In essence, they believe people beyond the asset threshold can liquidate some of these sources to make money. In other words, you could sell a vehicle or a boat to pay your property taxes. Such assets do not fall under the essential property. Therefore, the state considers them liquid and feels you should sell them to pay taxes. Is this fair? Maybe not, but there's not much you can do about it.
However, you can take other steps if you do not qualify for this assistance. Most states provide a variety of potential relief options. These go beyond traditional programs and include a myriad of other options. These all help to make sure you can minimize your property taxes properly.
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Qualifying for Assistance
Financial support for property taxes consists of loans, grants, tax credits, and much more. All of these options provide different qualifying elements for you. For example, loans typically require a decent credit score. In addition, you usually offer the home as collateral on the loan. Obviously, you need to pay back the loan eventually. And since most property tax loans require short-term cycles, you may experience some challenges.
Grants and tax credits provide money without the need to pay it back. Low-income families usually find this option works best for them. Even better, many state grants and tax credits focus on their needs.
For example, Michigan offers a Homestead Property Tax Credit Claim. Most states offer similar tax credits. So let's examine Michigan's tax credit to get an idea of how they operate.
This tax credit claim helps offset some property taxes for qualifying individuals. Assessors compare their total household resources and other expenses. They then come up with a relief option that makes sense. Homestead credits apply to any home where you reside, whether rented or owned by you.
Under this credit, you must possess just one homestead. You can own multiple homes, but only one can be your homestead. You must also occupy the house for a specific time. You cannot use this credit on things like cottages or college dorms. Low-income individuals often apply for and receive this tax credit. However, many things could disqualify you. Just a few of these qualifying factors include:
- Household resources less than $50,000
- A homestead with a taxable value below $135,000
- People whose resources don't consist of just the Family Independence Programs or other benefits
Homeowners must apply for this credit directly from the state. If they don't qualify, other options may help. For example, the Homeowners Property Tax Assistance Program helps Detroit residents. And the Michigan Home Heating Credit may help low-income families save money on heating expenses. The assistance of this type helps keep your property taxes within your income range.
Many other programs like this exist throughout the nation. Each provides varying guidelines suited to different financial situations. Talk to your state officials to learn more about your options for this kind of tax relief.
Steps to Take If You Don't Qualify
When you don't qualify for assistance programs, you can:
- Create a repayment plan with your county treasurer
- Talk to a Community Action Agency to learn more
- Work with the Department of Health and Human Services for more help
- Set up a GoFundMe page or other type of fundraiser
- Find church programs designed to help low-income individuals
These options allow you when other options fail you. If necessary, you may also need to work with a lender to get financial help.
A Few Reasons Why You Might Struggle With Property Taxes This Year
Loss of Income
Did you lose your job recently and haven't found one yet? Or did you find a job that doesn't pay as well as you wanted? Many people experience this struggle. Unfortunately, changes in job status don't impact your tax rate, meaning you could be stuck with a high property tax bill until you save money to pay.
People on unemployment often experience this problem the hardest. You'll have nowhere near enough money to pay all your bills. Unfortunately, your property tax might get missed. This situation requires property tax help for low-income homeowners. Thankfully, many types can help you.
Health Problems
Did a health issue take you out of work for an extended time? Or did permanent disability limit your potential income? Unfortunately, many low-income families experience this issue far too often. Your inability to work could make paying your property taxes seem basically impossible.
Even worse, you may collect heavy healthcare bills along the way. Without insurance (and even with), these bills may spiral out of control. This debt cycle is tragic and is one you can find on just about every street in America. And too few of these people know help is available for them.
Large Family Sizes
Large families create many unfortunate drawbacks. For example, a low-income house with many members may have little disposable income. You might find you can't even pay property taxes as a result. Many low-income families experience this problem when taking care of children and grandparents.
Sadly, you can't do much to change this situation. Grants may help people in this tough spot. However, too many low-income families must house multiple generations in the same home. Unfortunately, this could result in a struggle to pay property taxes.
Inflation
Inflation grows faster than living wages increase. Unfortunately, low-income families experience this issue the hardest. For example, home values may inflate so high that property taxes become hard to properly pay. Usually, this problem impacts older people or those living in an area over an extended period.
Tragically, you can't do much to stop inflation. As a result, low-income families may quickly find they cannot save enough money to pay these taxes. And they might find themselves facing a move or even homelessness as a result.
Gentrification
Improving a neighborhood to make it more livable may seem like a beneficial process. However, gentrification creates many harmful side effects. For example, the gentrification of a low-income neighborhood may raise property values for many homeowners in the area.
Why is that a bad thing? Increased property values result in higher property taxes. Unfortunately, low-income homeowners may find a more beautiful neighborhood pushes their living expenses too high. Of course, you could always sell your home in this situation. However, gentrification doesn't always make a community more desirable.
Ways We Can Help
Looking for a lender you can trust to help pay your property taxes? Please download our app and set up your profile today. Our application helps connect people like you with lenders you can trust. It includes a list of companies that work with low-income individuals. Many also work with high-risk borrowers or those with poor credit. Thankfully, our search engine helps improve your results.
For example, you can create individual search parameters that sort through low-income lenders. Then, you can narrow them down based on available loans. Consider factors like interest rate and collateral during your search as well. Carefully searching through all your available choices will help out massively and prevent confusion between different lenders.
Make sure you contact each potential lender first to learn more about their rates. Then, they will check your credit to pre-approve you and provide help if you do not qualify immediately. Often, many companies offer low-credit borrowing options for their customers. These choices help to streamline your opportunities. They also improve your likelihood of successfully getting a loan.
Final Thoughts
You deserve a great home and a stable life. So work with these programs to pay your property taxes and avoid foreclosure. Doing so can help minimize your struggles and make your life more enjoyable. You may also want to talk to a wealth and investment professional who can help you.
Many work with low-income individuals and show them how to make significant passive income when not at work. Though your initial investment may be low, you should improve your passive income to build more wealth. Doing so will keep your future solid and secure for years to come.