There are ways for seniors to get property tax breaks

Q: I just paid my property tax bill a couple of weeks ago, and I am seriously considering selling my home because I just don’t have enough money to live on. I am retired on a modest fixed income and these tax bills just keep going up and up. Is there anything I can do reduce my property taxes? – W.W., Lynnwood

A: Initiative 747, which passed on Nov. 6, will limit growth in the amount of property taxes that can be collected by the state. However, the average homeowner will not see a huge savings because much of your property tax bill goes to local government agencies that are not covered by the new law.

For many retired people like you, their home is their only major asset. And while their house may be worth hundreds of thousands of dollars, that equity doesn’t do them any good unless they sell it – which is the last thing most people want to do after raising their families and spending the best years of their lives in their home.

The good news is that there are some property tax relief programs available, depending on your age and income.

State law allows senior citizens to file for a partial property tax exemption. To qualify, the property owner must be at least 61 years old on Jan. 1 of the tax year (or retired because of physical disability or a widow or widower at least 57 years old whose spouse had an exemption at the time of his or her death), and earn no more than $30,000 per year, including Social Security, pensions, etc.

First, the assessed value of your property is frozen at what it was on Jan. 1 in the tax year in which you qualify. Then, there are three exemption levels based on the taxpayer’s income:

Seniors with an annual income of $18,000 or less can exempt either $50,000 or 60 percent of their home’s assessed value, whichever is greater, from taxes. For example, if a home has an assessed value of $200,000, it would be taxed as if it were assessed at only $80,000, reducing the taxable value by 60 percent. Property owners in this category are also exempt from all voter-approved levies, including schools.

Seniors who earn between $18,001 and $24,000 are allowed to exempt $40,000 or 35 percent of assessed valuation, whichever is greater, up to a maximum exemption of $60,000 (there is no maximum exemption for lower-income seniors). For example, if a home is assessed at $200,000, a 35 percent exemption would allow the taxpayer to exempt $70,000 of the assessed value. However, since that figure exceeds the $60,000 maximum exemption, the tax exemption would be limited to $60,000 and the homeowner would pay property taxes on a reduced value of $140,000. Seniors in this income category are also exempt from all local levies.

Seniors earning between $24,001 and $30,000 are exempt only from paying for voter-approved levies. They must pay the base property tax rate on the full assessed value of their home.

There are other restrictions on the property tax exemption besides homeowner income limits. The amount of property covered by the exemption is restricted to one primary residence and one acre of land. Any additional land is taxed at the full rate.

But the tax exemption isn’t the only way to ease the burden of semiannual property tax bills. Some seniors can take advantage of a state tax deferral plan.

Under that plan, seniors who earn less than $34,000 a year can defer payment of special assessments and/or property taxes on up to 80 percent of the property’s assessed value.

But it’s not a free ride.

The state pays the property tax bill for the homeowner and places a lien on the home. When the home is eventually sold, the state is repaid – with interest. The property tax exemption program can be combined with the deferral plan to reduce the total tax bill paid by the state, thereby reducing the amount of interest that must be repaid upon the sale of the home.

The property tax deferral program can save seniors from losing their homes because of rising tax bills, but it also eats up a big chunk of the equity in the home if the deferral is used for many years. Of course, this is only a concern to the heirs who inherit the estate upon the homeowner’s death.

For more information about senior citizen property tax exemption and deferral programs, call your local county tax assessor’s office. In Snohomish County, the phone number is 425-388-3540. In Island County, it’s 360-679-7303.

Mail your real estate questions to Steve Tytler, The Herald, P.O. Box 930, Everett, WA 98206. Fax questions to Tytler at 425-339-3435, or e-mail him at economy@heraldnet.com

Steve Tytler is a licensed real estate broker and owner of Best Mortgage, Inc. You can visit the Best Mortage Web site at www.bestmortgage.com.