Property Tax Exemptions

Last week, I read an article about a disabled veteran who paid thousands of dollars in property taxes that he didn’t need to. For years he hadn’t known that, as a disabled veteran, he was eligible for a property tax exemption. Since I figured he can’t be the only veteran that didn’t know, and since property taxes can raise your mortgage significantly, I decided that property tax exemptions might be a good topic for a post.

Property tax exemptions, sometimes referred to as an Ad Valorem Tax Exemption, essentially lower the amount of your home’s value that can be taxed, thereby lowering the taxes you pay. Often these exemptions come in the form of a homestead exemption, which is essentially an incentive to make you want to live in the house you purchase, or exemptions for those over 65 or those who have a disability. Most states also offer some type of property tax reduction for at least one category of veteran. (The only states that don’t have any veterans’ exemptions are Delaware and Missouri.)

Generally, you can find out if your state offers a veterans’ exemption by accessing either your state’s veterans affairs website or getting a copy of your state’s veterans benefits guidebook. However, it’s also advisable to go to your county’s, or sometimes city, municipality, school district, website to confirm that they offer the exemption, as state’s generally give these entities the option to participate or not. Once you purchase your home, it’s also a good idea to stay up to date on changes to the tax code as laws and regulations do change. For example, starting in 2014, New York is now also giving school districts the option to offer the “Alternative Veterans’ Exemption,” one of three exemptions offered to veterans of NY.

In addition to finding out whether your state/county/municipality offers a veterans’ exemption, there are a few specific questions you should ask:

Who qualifies for the exemption? Some states will only offer exemptions to honorably discharged veterans with 100% service-connected disability ratings or those who are compensated at the 100% level due to an Individual Unemployability rating. Others offer them to veterans with any disability rating or to all veterans, even those without a disability rating, and even servicemembers; those with special adaptive housing grants (a topic I’ll discuss later this week) or with specific conditions (such as loss of a limb); surviving spouses, generally only if they are unmarried; and even Gold Star parents. A few also have income or age requirements in addition to disability levels.

What are the application and proof requirements? The state/county has no way to know that you qualify for these benefits, so you’ll need to contact your local property appraiser’s or tax collector’s office to obtain an application. Most of them will have the application on their website or it can be picked up from their office. In many cases, you will need to provide proof of disability and/or character of service. I recommend printing off a letter from Ebenefits, which lists your percentage rating and allows you to choose what other information is disclosed. You may also need to provide proof of service during a specific time, such as Vietnam or Iraq, or proof of an expeditionary award, so keep your DD-214 (long copy) handy as well. Surviving spouses and Gold Star parents may have to provide a death certificate or a document from VA stating that the veteran died while in service or due to service-connected causes. For those that have income requirements, you can expect to provide tax or income verification documentation. (If your only income is untaxable VA income, you can print a copy of all your payments from Ebenefits.)

When is the application due? Generally, exemption applications have deadlines set somewhere in the first quarter of the year. If you miss the deadline, you will have to continue paying the current tax rate until the following year’s application window and your benefit will not be backdated.

Do you have to apply just once or annually? Exemptions based on disability rating usually only have to be applied for once, except in cases where you move, then you must refile for that exemption with your new address. However, exemptions that also have an income requirement component will likely require annual applications so that the income can be verified.

Can you qualify for multiple exemptions? In some states, you may qualify for a veterans’ exemption in addition to a homestead exemption. In others, you must choose one or the other. Some states even allow multiple disabled veteran exemptions if both spouses have a qualifying disability rating.

Which taxes are exempted? In some states, the exemption may apply to most, but not all taxes. For example, county and city taxes may be exempt, but school district or special district taxes may not.

When you file your exemption application, be sure to make a copy of all the documentation (preferably with a stamp on it showing that it was received). Generally, a few months after your application is filed, you should receive, or be able to request, a letter from your property appraiser stating your new tax rates. You must send this document to your mortgage lender in order to get the adjustment reflected in your mortgage payment. In a few cases, the exemption comes in the form of a reimbursement, rather than an exemption. In those cases, you’ll need to ask your tax collector or property appraiser how that process works. You’ll also need to contact them for more complicated questions, such as what happens if the property is in a trust or if the property is partially owned by a non-spouse.

© 2014, Sarah Maples. All rights reserved.

You Might Also Like

No Comments

    Leave a Reply