Approximately 100 million Americans rent their homes. Over double this number of people own theirs.
Owning your own home comes with many benefits, such as not having to deal with a landlord, more predictable monthly costs, and a greater tie to your community.
But, you’re also faced with the responsibility of paying property taxes. Fortunately, there are certain circumstances where you can qualify for property tax exemptions, and who doesn’t love deductions?
Not sure where to start? Don’t worry, we’ve got you covered.
Let’s take a look at what you need to keep in mind.
Some things get better with age.
If you’re a senior citizen, you’ll be pleased to learn you may qualify for property tax exemptions for your home. While the minimum age to qualify varies from state to state, it isn’t always 65, meaning you could cash in a bit earlier depending on your location.
However, there are also often restrictions based on your residency and income.
So, if you’re an elderly person with a high-paying job or substantial monthly income, you can expect to get less of a break compared to someone with a less stable financial situation.
Regardless, these exemptions offer seniors a (sometimes much-needed) opportunity to save some extra cash.
The amount of tax relief you’ll get from homestead tax exemptions can be highly variable based on your location. But, you’ll still be saving money by taking advantage of them.
However, it’s also important to know if you qualify at all.
A homestead is considered a structure that is owned by the person who lives in it. The term “structure” could apply to a home or condo.
Homestead exemptions lower your taxes by effectively “overlooking” part of your home’s value. For example, if your home has been appraised at $200,000 and your state offers you a $50,000 homestead exemption, you’ll pay your property taxes as if your home were worth $150,000.
As you can see, you have the potential to save a large chunk of cash if your state is generous with its exemptions, so make sure to do your research on your local tax laws.
Exemptions for Renovations
This is another type of exemption that can vary greatly from state to state.
Some areas give you a tax break for fixing up an old property, while others give you an exemption for certain types of improvements or additions regardless of how new your property is.
Since you won’t know if your renovation will qualify until you check with your local tax assessor, it’s crucial to put off any home improvements and find out exactly what benefits you’ll be receiving.
But, keep in mind that you’re only receiving an exemption for the value the addition adds to your home’s appraisal. So, if you weren’t already planning on building, it might be wise to save the money.
Energy Incentive Exemptions
This type of exemption is particularly important to take into consideration since you can also drastically cut down on your home’s energy bill.
Similar to homestead exemptions, energy incentive tax breaks exclude the value of certain energy-efficient additions to your home during appraisal.
Green additions like heat pumps, water heaters, and solar panels are great things to consider if you’re looking to save money on your energy costs without increasing the amount you pay in property taxes.
As previously mentioned, though, you shouldn’t add to your home for the sake of a tax exemption unless you were already planning to. This will allow you to save the money needed for installation costs until you’re ready.
Military Veteran Exemptions
Those who have served in the military will find that there are plenty of opportunities for them when it comes to property tax exemptions.
In general, veterans who served during a period of war, veterans who were honorably discharged, or who use the property in question as their primary residence are eligible for this benefit.
The amount of tax exemption you receive heavily depends on the state you live in. The type of military service member also plays a role.
In some areas, veterans of any kind receive exemptions on their property. In others, only former service members who are currently disabled can claim the tax breaks.
But, if you are a parent or widow(er) of a disabled veteran, there’s a chance you might be eligible for an exemption, as well.
Furthermore, active duty members who have served overseas may also qualify.
For a full list of the veteran property tax exemption benefits that each state offers, click here.
If none of the exemptions above apply to your situation, you may be in luck.
Some states (and even cities) offer unique tax exemptions for very specific scenarios.
For example, you might be able to secure a property tax break if a home that you build or renovate is going to be given to an elderly member of your immediate family.
There are cities/counties that give tax breaks to local firefighters and members of law enforcement who are first responders. Widows and widowers may also be eligible.
Though these amounts vary (if they exist in your region at all), it’s best to save as much money as you can as a homeowner.
Property Tax Exemptions Can Seem Confusing
But they don’t have to be.
With the above information about property tax exemptions in mind, you’ll be well on your way to saving a significant amount of money.
Want to learn more about how you can better handle your taxes? Check out the rest of our blog!