You may be surprised, but no state government collects property taxes directly tied to property values. When it comes to taxing real estate, you have to look at the local level, such as counties, cities, school districts, fire and transportation districts. People in some localities make multiple annual payments for taxes based on their real estate holdings, but according to a review of property taxation complied by the Retirement Living Information Center, nearly all states offer seniors some form of relief. Gaining the best advantage over property taxes, then, is a matter of selecting a local area with a low tax rate in a state that offers additional tax breaks.
Basic Property Tax
If you start with the lowest property taxes collected, a few states stand out. Alabama is ranked as having the lowest median property taxes collected in 2006, at just $328, according to Top Retirements. Alaska has only 25 municipalities in the state that levy a property tax, according to the Retirement Living Information Center, but as of 2009, The Tax Foundation ranked Louisiana as the state with the lowest property taxes on owner-occupied homes, as ranked by taxes as a percentage of home value. In fact, of the counties with the lowest taxes on owner-occupied homes in America, eight out of 10 were located in Louisiana. Of course, counties are called parishes in Louisiana.
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Property Tax Breaks
States offer property tax breaks to seniors in a variety of ways, but the three most common methods are property tax deferral programs, circuit-breaker programs and homestead exemption, or credit programs. Twenty-four states and the District of Columbia offer property tax deferral programs for senior homeowners who qualify. The age for qualifying varies, from 62 in California, Georgia and Oregon to age 70 in Arizona, South Dakota and Florida. Taxes are deferred as long as the homeowner owns the property and are then paid from the proceeds if the home is sold during the owner's life or when the owner dies.
If you are a retiree with low income, 18 states will consider your ability to pay the property tax and offer a break known as a "property tax circuit breaker" to those who qualify. This tax break protects low-income homeowners from a rise in property taxes following a rise in property values. Of these states, only eight offer property tax circuit breakers exclusively to senior citizens and people with disabilities.
Homestead exemption laws are designed to protect one primary residence of a person. The laws prevent a forced sale of the home to meet the demands of creditors, provide shelter for a surviving spouse and provide a property tax exemption. Homestead laws vary from one state to another, but according to a survey published by U.S. Legal Forms, only New Jersey, Pennsylvania, South Carolina and Delaware do not offer some form of homestead exemption or tax credit program.
- Retirement Living Information Center: Taxes by State
- Kiplinger: Retiree Tax Heavens (and Hells)
- Money MSN; Best, Worst States for Retiree Taxes; November 2010
- Top Retirements: Looking for the Most Tax-Friendly States?
- U.S. Legal Forms: Homestead Forms FAQ
- Center of Budget and Policy Priorities; The Property Tax Circuit Breaker; Karen Lyons, et. al; March 2007
- Tax Foundation; Tax Data; September 2010
- Clemson University; Property Tax Relief Programs in the United States; July 2004