Are You Entitled to a Property Tax Exemption?

Nobody likes paying a dime extra in taxes. Yet when it comes to property tax bills, some homeowners pay too much simply because they aren't aware they qualify for an exemption.

In most cases, you have to find and apply for property tax exemptions offered by states, counties, or local jurisdictions. The agency that collects your property tax can tell you where to find information about the exemptions it offers.

Research and paperwork might take a couple of hours or so, but the effort could lower your tax bill noticeably.

Here are five of the most common types of property tax exemptions:

1. Homestead

Homestead exemptions keep you from paying tax on a certain portion of your home value. For example, in Alaska, those age 65 or better don't pay taxes on the first $150,000 of assessed value for a primary residence.

Some states tie the homestead exemption to other criteria such as age or income level. Each locality has its own rules and deadlines for applying. Some even require you to re-apply each year.

Many states offer generous property tax exemptions to both older homeowners and the disabled. South Dakota, for example, has multiple relief programs that allow both groups to seek property tax refunds and reductions in real estate assessments.

There are age, income, and residency restrictions. Read the fine print. A homestead exemption aimed at the elderly may only defer property taxes until the home is sold. And don't assume exemptions for seniors kick in at 65.

• Washington state reduces property taxes for homeowners the year after they're 61.

• New Hampshire increases the size of the low-income senior homestead exemption as you age.

To qualify for a property tax exemption based on your disability, you'll be required to show proof, such as eligibility for Social Security disability benefits.

3. Military Veterans

Service to your country abroad may grant you property tax relief at home. Exemptions are generally available for veterans who:

• Use the home as their primary residency

• Served during wartime

• Were honorably discharged

Some states offer property tax exemptions to all veterans. Others, like Pennsylvania, target disabled vets.

To qualify, you may need to meet other requirements like length of residency or income restrictions. Parents and widows of disabled service members may also qualify for property tax exemptions.

4. Renovations

If you like to renovate, check for a property tax break like these:

• In Bismarck, N.D., fixing up a residential property that's more than 25 years old can earn you a five-year exemption from paying property taxes on the value the remodeling added to your home.

• In Pierce County, Wash., you can get a three-year exemption for home improvements up to a certain percentage of your assessed value.

Be sure to check with your tax assessor's office before tearing anything down; applications may need to be approved before work begins.

5. Energy Incentives

Installing renewable energy systems in your house could pay off on your property tax bill as well as your energy bill. Some states exclude the value of certain green improvements from a home's real estate assessment.

Eligible upgrades may include the installation of solar panels or geothermal heat pumps.

Look for information on state and local property tax breaks for renewable energy systems on the Database of State Incentives for Renewables & Efficiency.

Other Exemptions

A visit to your local tax assessor's office may turn up other less common property tax exemptions.

• Smithtown, N.Y., exempts property you build or renovate to give a grandparent a home.

• Counties in New York state reduce the assessed value of the homes of volunteer firefighters.

• Many states offer widow/widower exemptions. It doesn't hurt to ask if yours does.

Are Exemptions Worth the Effort?

The U.S. median property tax paid is about $2,000 annually, or about 1% of the $200,000 median home value. Savings from exemptions will vary widely depending where you live, the value of your home, and what you qualify for. A 15% exemption would save about $300.

This article provides general information about tax laws and consequences, and shouldn't be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice.