ELDERLY; PROPERTY TAX;

TAXES - PROPERTY;

OLR Research Report


December 9, 2003

 

2003-R-0873

CAP ON PROPERTY TAX PAYMENTS FOR ELDERLY HOMEOWNERS

By: John Rappa, Principal Analyst

You wanted to know which states freeze the amount of property taxes elderly people pay.

SUMMARY

At least 12 states authorize some form of property tax freeze for elderly homeowners. (Five also extend the freeze to taxpayers with disabilities, regardless of age. ) Most freeze the assessment, that is the require counties, municipalities, or school districts to tax the homes based on their values for a specified year, regardless of whether those values subsequently increased. This method limits the extent to which homeowners’ annual taxes can increase by excluding the increase in assessed value from taxation. But it does not freeze the amount they pay, since towns can increase the rate at which they tax the frozen value.

Washington requires municipalities to freeze tax payments as well. New Jersey does this indirectly by reimbursing elderly taxpayers for payments that exceed those they made in a specified year. Texas freezes school district taxes. Unlike the other states, Rhode Island does not mandate tax freezes but gives towns the choice of freezing property values or tax rates.

In most of the states, elderly taxpayers must meet age and income criteria. Arizona, New Jersey, and South Dakota also require them to meet home occupancy and state residency criteria.

Attachment 1 is a table that compares the 12 states’ freeze programs and Attachments 2-13 are copies of the constitutional or statutory provisions that authorize them. Attachment 14 is a 2002 study comparing states’ property tax relief programs (State Programs and Practices for Reducing Residential Property Taxes, David Baer, AARP Public Policy Institute, http: //www. aarp. org/ppi).

TYPES OF FREEZE

Assessment

Assessment freezes affect how much of a property’s value local and county governments can tax. These governments tax real property based on the price people are willing to pay for it over time. The price often changes, reflecting changes in market demand and the property’s condition. For this reason, governments periodically reassess property values to capture changes over time. Ten states require or allow municipalities to freeze the values of elderly taxpayers’ homes at what they were in a specified year (i. e. , base year), unless a subsequent new assessment is lower than the base year’s.

For example, Arkansas’s base year is 2001 for people who had turned age 65 (or became disabled) before that year. If they purchased or constructed a home after January 1, 2001, the base year is the year they purchased or constructed the home. For people who turned 65 after January 1, 2001, the base year is the year they turned 65. Arkansas and Georgia require municipalities to increase the base year assessment if the property was subsequently improved or expanded.

Tax Payments

A few states relieve elderly homeowners from paying property taxes above the amounts paid in a specified base year. Texas and Washington relieve them from paying excess school district and municipal property taxes, respectively. New Jersey instead reimburses them for the excess taxes, which shifts the cost from local to state taxpayers. Budget problems in 2002 allowed the state to reimburse only those taxpayers it reimbursed in 2001. It also capped the reimbursement amounts at the 2001 level.

ELIGIBILITY CRITERIA

In most states, elderly taxpayers must meet age and income criteria. They must be at least age 65 in all of the states except Georgia and Washington, where the age limits are 62 and 61, respectively.

Elderly taxpayers in nine states must also meet income criteria, which consist of income thresholds and definitions of income.

Louisiana, New Mexico, and South Dakota annually adjust the income limits based on changes in the Consumer Price Index.

Attachment 1: States Authorizing Property Tax Freezes for Elderly Homeowners

State

Freeze applies to:

Eligibility Criteria

Citation and

Age

Minimum

Income

Limits

Home

Occupancy

State Residency

Attachment No.

AZ

Full cash value of property for year owner applied and qualified for exemption

65

Total income from all sources:

400% or less of Supplemental Social Security (SSI) benefit rate if single and 500% or less of SSI if married

At last two years

Not Applicable (NA)

Ariz. Const. Art. 9 Sec. 18; 2

AR

Lower of the assessed value at certain dates or a later assessed value

Freeze doesn’t apply to increases in assessed value resulting from substantial property improvements

65 (disabled also qualify)

NA

NA

NA

Ark. Amend. Const. 79 Sec. 1; 3

GA

Assessed value for year owner granted exemption

Freeze doesn’t apply to increases in assessments resulting from improvements or land additions.

62

Federal adjusted gross income of $ 30,000 or less

NA

NA

GA Code Sec. 48-5-47. 1; 4

IL

Lower of equalized assessed value for year owner applied and qualified for exemption or a subsequent equalized assessed value; if subsequent assessed value is lower, then the freeze applies to that value

65

$ 40,000 or less, excluding veterans benefits

NA

NA

35 Ill. Comp. Stat. 200/15-172; 5

LA

Assessed value for year owner applied and qualified for exemption

65

Federal adjusted gross income of $ 50,000 or less, with annual adjustments based on the Consumer Price Index (CPI)

NA

NA

La Const. Art. 7 Sec. 18; 6

NJ

Amount of taxes paid above those paid in base year; state reimburses taxpayers for those amounts

65 or older (disabled also qualify)

Income limits adjusted annually (2002: $ 39,475, if single; $ 48,404 if married)

At least three years

At least 10 years

NJ Stat. Ann Sec. 54: 4-8. 67; 7

NM

Lower of the assessed value at certain dates or a later assessed value

65 or older

Modified gross income per state law of $ 18,000 or less, as annually adjusted per statutory formula

NA

NA

NM Stat. Ann. Sec. 7-36-21. 3; 8

OK

Fair cash value of property for year owner applied and qualified for exemption

65 or older

Gross household income of all members from all sources of $ 25,000 or less

NA

NA

Okla. Const Art. 10 Sec. 8c; 9

RI

Tax rate and assessed value at towns’ discretion

65 or older (disabled also qualify)

Income from all sources; statutory income limits vary from town to town

NA

NA

R. I. Gen. Laws Sec. 44-3-16; 10

SD

Lower of the assessed value at certain dates or a later assessed value

65 or older (disabled also qualify)

In 2002, federal adjusted gross income plus nontaxable income $ 15,041 for single member households and $ 18,801 for multimember households, with annually CPI adjustments starting in 2003

One year plus occupancy for at least 200 days in the year prior to applying for the freeze

At least one year

S. D. Codified Laws Sec. 10-6A-2; 11

TX

Increases in school district property taxes occurring after the taxpayer qualifies for the exemption

65 or older

NA

NA

NA

Tex. Const. Art. 8 Sec. 1(d); 12

WA

Lower of the 1995 assessed value or later assessed value and amount of taxes due above the amount due that year

61 or older (disabled also qualify)

Combined disposal income of $ 30,000 or less

NA

NA

RWC Sec. 84. 36. 381; 13

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