July 14, 2006
STATE AND LOCAL OPTION PROPERTY TAX RELIEF FOR SENIORS
By: Helga Niesz, Principal Analyst
You asked what property tax relief is available to Connecticut's senior homeowners.
All towns must offer homeowners age 65 and over and younger people with disabilities tax relief under the “circuit breaker” program, which provides a tax credit based on the participant's income and marital status. They must also continue to freeze taxes for those few people age 65 or older or disabled who still participate in the Tax Freeze Program, which has not accepted new applications for decades. The state reimburses towns for the taxes they lose under these two programs.
In addition, towns may offer seniors age 65 and over additional “local option” tax relief, subject to certain state statutory restrictions. But the state does not reimburse towns for these programs.
Legislation in 2006 allows towns, without state reimbursement, to freeze the property taxes for homeowners if they or their spouses are age 70 or older and meet the circuit breaker program's income limits.
Seniors who are veterans may also be eligible for various veterans' tax exemptions, which are not based on age. In some towns, they may also be eligible for tax relief for low-income people of any age whose taxes comprise more than a certain percentage of their income.
The “Circuit Breaker” Program (known formally as the Elderly and Totally Disabled Tax Relief Program) entitles the elderly to a property tax reduction or a rent rebate, depending on whether they are homeowners or renters. An applicant must (1) be 65 years of age or older, have a spouse who is 65 or older, or be at least 50 and a surviving spouse of someone who at the time of his death was eligible for the program; (2) occupy the property as his home; and (3) have lived in Connecticut at least one year before applying for benefits. For applications filed in 2006, yearly income in 2005 cannot exceed $33,900 for married couples and $27,700 for singles. These income limits are adjusted annually for inflation.
The Tax Freeze Program fixes a participant's property tax payment at a reduced level. It began in 1967, but stopped accepting new participants in 1979. People who were in the program when it closed continue to receive benefits. The program generally freezes property taxes for homeowners age 65 and over who have $6,000 or less in annual qualifying income (Qualifying income includes federal adjusted gross income plus tax-exempt interest and excludes Social Security income, U.S. Postal pensions, and certain other types of income.) The tax payment was calculated by multiplying the property's assessed value, minus $1,000, times the mill rate of the year in which the person first received benefits. Thereafter, the property tax was frozen, even if the mill rate rose or the assessed value of the home went up.
LOCAL OPTION TAX RELIEF FOR ELDERLY AND LOW-INCOME PEOPLE
The law allows towns to provide optional property tax relief to seniors over age 65 and disabled people without state reimbursement. It lets towns set maximum income limits for this tax relief. Thus, towns may provide relief to homeowners already receiving tax relief under the circuit breaker program as well as to those who do not meet that program's income criteria. But the overall amount of annual tax relief a town can provide under this authority is limited to 10% of the total value of real property in the town. And the total value of tax relief a particular homeowner can receive under this and the state programs cannot exceed his annual tax. The town must put a lien on the property if the amount of tax relief is more than 75% of the tax owed, and the law places several other restrictions on optional, unreimbursed local tax relief (CGS § 12-129n).
Towns' legislative bodies can vote to abate property taxes for any homeowner regardless of age, if the tax exceeds 8% of the owner's income for a given year. The owner must agree to reimburse the town for the abated amount plus interest when he dies or the property is sold (CGS § 12-124a).
NEW LOCAL OPTION SENIOR PROPERTY TAX FREEZE (PA 06-176)
2006 legislation allows towns to freeze property taxes on homes owned by people age 70 or older who have lived in the state at least one year. The freeze can also apply to a surviving spouse who is at least age 62 when the homeowner dies. Homeowners must meet the income limits for the “circuit breaker” program (see above). People whose taxes are frozen can also qualify for other property tax relief programs.
Unlike the circuit breaker and old tax freeze programs, the new law does not provide state reimbursement for revenue a town loses by freezing taxes, but it allows the town to put a lien for the amount of the foregone taxes on the property and to set asset limits for eligibility.
RELATED OLR REPORTS
The following enclosed Office of Legislative Research reports provide more details on these tax relief programs:
● OLR Report 2006-R-0445, Property Tax Relief for Seniors, 7/13/06
● OLR Report 2006-R-0342, Local Option Elderly Property Tax Relief 5/23/06
● OLR Report 2006-R-0309, Comparison of New Elderly Tax Freeze in HB 5093 with Circuit Breaker, 4/24/06
● OLR Report 2005-R-0884, Veterans Property Tax Exemptions, 12/15/05