Tax Relief

What is Property Tax Relief? Five Ways to Get it

Even when you’ve paid off your home, there is one bill you cannot eliminate – property taxes. In most states, this bill will continue to increase year after year as the value of your home appreciates. But there are ways to reduce your annual property tax bill and keep more money in your pocket. What is property tax relief and how can you get it? Keep reading to find out.

Why do I pay property taxes?

Property taxes are a way for state and local governments to pay for the essential services used by the local community. This includes fire and police departments, libraries, and local government officials.

Property taxes are also used to fund public schools. Affluent areas generally have schools that are ranked higher because of the additional funding provided by the taxes on high property values.

How are property taxes calculated?

Each year the local tax assessor performs an evaluation of your home to determine the value of the land. But don’t worry – nobody will come knocking on your door.

To simplify their work, the tax assessor’s office performs a similar process as Zillow does when it calculates the value of your home. This data includes recent sales, improvement permits, lot size, square footage, and many other variables.

The tax assessor will calculate your property taxes once the value of your home is determined. In some communities, there will be taxes for state, county, city, and local governments.

If your mortgage is “escrowed,” a portion of your property taxes is paid each month. When the property taxes are due, your mortgage company will pay it for you.

The graph below shows the property tax rate by state and how much you would pay on a home with a median value in that state.

What is property tax relief and how do I get it?

Property tax relief is the reduction of a tax liability based on a qualified exclusion.

There are several ways to get property tax relief for your home. For example, you can adjust the value of your home, show proof of being a qualified taxpayer, or make certain improvements to your home.

Here are five ways you can get property tax relief.

1. Homeowners property tax exemption

The homeowners’ property tax exemption is known as a “homestead exemption.” This exemption allows you to avoid paying taxes on a portion of your home. Depending on the rules, your exemption will be a flat amount or percentage of the home value.

Some exemptions are based on age, income, disability status, or military service. In California, I only had to complete my homestead exemption paperwork once. For some exemptions, you’ll need to reapply each year.

2. Property tax relief for seniors and people with disabilities

Most states offer the ability for seniors and disabled people to receive a reduction in their property taxes. There are age, income, and residency restrictions that must be met in order to qualify. Every state has their own rules to meet their local needs.

For example, California voters passed Propositions 60 and 90 to help senior citizens. These laws allow seniors to keep their property tax basis when selling one home and buying another.

The only caveat is that the new home must be equal to or lesser than the current home. This California property tax exemption begins at age 55.

3. Military veterans property tax exemptions

Many local governments offer benefits to our military veterans to thank them for their service. Riverside County – located 60 miles East of Los Angeles – is one of them. If you are a California veteran with a 100% disability rating, you could be eligible to receive an exemption of up to $150,000 off the assessed value of your home.

4. Dispute property tax assessment

Home values have been climbing since 2010 in most areas across the country. That being so, homeowners should expect to pay more in taxes.

But what happens if your property taxes keep climbing while your home is falling in value? This is exactly what happened to many of my friends in California from 2007 through 2010.

If you feel that the tax assessor is valuing your home above market value, you can dispute their valuation. You’ll need to bring evidence to support your argument, such as an appraisal that will highlight recent sales of comparable homes.

A qualified tax attorney can help you get approved for the exemptions for which you’re qualified.

5. Home improvements

You can be rewarded for upgrading your home.

Local governments want homeowners to improve their homes to make them more energy-efficient and attractive to families looking to move into the city. These cities offer reduced or waived property taxes on the improvements.

Plus, energy-efficient upgrades serve a dual purpose. They increase the value of homes for the homeowner and reduce the strain on the local utilities.

This, in turn, will reduce the need for major Public Work investments. In other words, the government will give you a little bit of money so they don’t have to spend a lot of it.

Your next steps to obtain property tax relief

First, file for a homestead exemption to get immediate relief. This is the quickest and easiest path to reducing your property taxes.

Next, take stock of your situation. Do you meet any of the common criteria listed above that will help you get an additional exemption?

Do you still have questions? Our Tax Relief Industry Study provides a deep dive into the different options available to taxpayers.