For many thriving retirees seeking to maximize their retirement income, it can make sense to relocate to a more tax-friendly area. But if you’re thinking of buying a retirement home in a different state, don’t make the mistake of looking only at places with no income tax. In fact, most seniors should probably pay more careful attention to the property taxes in their chosen relocation area. Actually, several states with no income taxes have higher property taxes, since state governments have to find a way to balance their budgets.
The reason to be vigilant about property taxes is that the value of a home will typically rise over the years, bringing the property taxes up with it. But for many seniors, rising home values are not accompanied by an increase in income. If they aren’t careful, retirees can find themselves living in a home that they have owned for many years—often mortgage-free—but facing a steadily rising property tax bill that could begin to strain their means.
Fortunately, many states offer property tax exemptions, credits, freezes, and deferrals for seniors. But you have to do some digging to find out where the best exemptions are and how to qualify for them. Because these matters are controlled at the state level and sometimes even at the county level, there is no central clearinghouse or directory for learning about senior property tax exemptions or what you must do to take advantage of them. But a Google search for “senior property tax exemptions [your state]” will usually get you on the right track. Kiplinger provides a general map showing the relative “tax-friendliness” of each state to retirees; this is a good place to get started, as well.
Here are some examples of property tax exemptions and other benefits offered by various states that are intended to assist seniors.
In California, seniors who qualify can postpone payment of property taxes. To qualify, you must be 62 or older, have annual income below $35,500, and have at least 40% equity in your home. Note that the taxes still have to be paid, however, and the deferral is secured by a lien against the property.
In Texas, homeowners 65 and older can exempt $10,000 of the value of their primary residence from school taxes. Other taxing entities may offer exemptions of as much as $3,000.
In South Carolina, you can exempt the first $50,000 of fair market value of your home from property tax if you are 65 or older and have been a legal resident of the state for at least a year.
Also, during the current pandemic, many states are providing general relief or relaxed due dates for property taxes for seniors and others. Google “coronavirus property tax relief [your state]” to get more specific information.
I specialize in helping thriving retirees create financial plans and strategies that can help them enjoy the lifestyle they have earned. If you have questions about taxes and their effect on your retirement income, please contact my office to set an appointment. To read my recent article, “Making It on Your Own: Retiring Successfully as a Single Woman,” click here.
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