Property Tax Relief

Definition

A set of state policies that assist homeowners in meeting their property tax burden, including circuit breakers and tax deferment, 2011.

Description

Property taxes are an important revenue source for local governments, but they can be burdensome for low- and moderate-income families, particularly for those that have experienced housing cost increases greater than increases in their incomes. Furthermore, even during periods of decreasing housing costs, tax burdens may continue to rise due to the way states and localities calculate property tax. States have used many strategies to reduce property tax burdens, including those that provide relief more widely to all homeowners, e.g., homestead exemptions and assessment caps. More effective, however, are programs targeted at homeowners that need relief most.

States are assessed on the adoption of the following direct property tax relief programs:

1. Circuit breakers: Circuit breakers are property tax relief programs that target low- and moderate-income homeowners. Property tax circuit breakers provide households with direct property tax relief that increases as household income declines. Circuit breakers kick in when property taxes exceed a certain percentage of a household's income and provide a property tax rebate or tax subsidy for qualifying households. States are assessed on three elements of a circuit breaker program:

• Is the circuit breaker state-funded? Local funding can be problematic because some local governments are better able to provide relief than others. In addition, some localities will have a higher percentage of homeowners requiring assistance. States are better suited to administer programs that redistribute income such as property tax relief.
• Are people of all ages eligible? States often provide circuit breakers for only the elderly or disabled, using those characteristics as a proxy for financial need. However, financial hardship is not limited to particular groups, and poverty rates are currently lower for the elderly than they are for working-age adults.
• Are renters and homeowners eligible? Renters do not receive a property tax bill, but it does not mean that they do not pay the cost of property taxes. Landlords pass property tax burdens on to renters through higher rent, and generally, renters have lower incomes than homeowners.

2. Tax deferrals: Property tax deferral programs allow homeowners to defer payment of all or a portion of their property taxes until the sale of their property or death. The deferred taxes become a lien against the value of the home and are, in essence, a public sector reverse mortgage. Most states target these programs towards low-income, elderly homeowners. Tax deferrals can help homeowners stay in their homes, particularly for those with high property tax burdens.

toggle page width

Property Tax Relief

State	Is there a state-funded circuit breaker?	Are all eligible?	Are renters eligible?	Deferral?
Alabama	No	—	—	No
Alaska	No	—	—	Yes
Arizona	Yes	No (Elderly and disabled only)	Yes	Yes
Arkansas	No	—	—	No
California	Yes	No (Elderly and disabled only)	Yes	Yes
Colorado	Yes	No (Elderly and disabled only)	Yes	Yes
Connecticut	Yes	Yes	No	Yes 1
Delaware	No	—	—	No
District of Columbia	Yes	Yes	Yes	Yes
Florida	No	—	—	Yes
Georgia	No	—	—	Yes
Hawaii	No 2	—	—	No
Idaho	Yes	Yes (Elderly and disabled; veterans; POWs; fatherless or motherless minors; widows or widowers)	No	Yes
Illinois	Yes	No (Elderly and disabled only)	Yes	Yes
Indiana	No	—	—	No
Iowa	Yes	No (Elderly and disabled only)	Yes	No
Kansas	Yes	Yes (Elderly and disabled; a surviving spouse of a member of the active duty military who died in line of fire; a person with one or more dependent children under the age of 18)	Yes	No
Kentucky	No	—	—	No
Louisiana	No	—	—	No
Maine	Yes	Yes	Yes	Yes
Maryland	Yes	Yes	Yes (Renters must be elderly, disabled, or have gross income below the federal poverty threshold and have one or more dependent children living with in the household)	Yes
Massachusetts	Yes	No (Elderly only)	Yes	Yes
Michigan	Yes	Yes	Yes	Yes
Minnesota	Yes	Yes	Yes	Yes
Mississippi	No	—	—	No
Missouri	Yes	No (Elderly and disabled only)	Yes	No
Montana	Yes	Yes	Yes (Renters must be elderly)	No 3
Nebraska	Yes	No (Elderly and disabled only)	No	No
Nevada	Yes	No (Elderly only)	Yes	Yes
New Hampshire	Yes	Yes	No	Yes 1
New Jersey	Yes	Yes	Yes	No
New Mexico	Yes	No (Elderly only)	Yes	No
New York	Yes	Yes	Yes	No
North Carolina	Yes	No (Elderly and disabled only)	No	No
North Dakota	Yes	No (Elderly and disabled only)	Yes	No
Ohio	No	—	—	No 3
Oklahoma	Yes	No (Elderly and disabled only)	No	No
Oregon	Yes	Yes	Yes 4	Yes
Pennsylvania	Yes	No (Elderly and disabled only)	Yes	No
Rhode Island	Yes	No (Elderly and disabled only)	Yes	Yes 1
South Carolina	No	—	—	No
South Dakota	Yes	No (Elderly and disabled only)	No	Yes
Tennessee	No	—	—	Yes
Texas	No	—	—	No
Utah	Yes	No (Elderly only)	Yes	No
Vermont	Yes	Yes	Yes	No
Virginia	No	—	—	Yes 1
Washington	Yes	No (Elderly and disabled only)	No	Yes
West Virginia	Yes	Yes	Yes (Renters must be elderly)	Yes
Wisconsin	Yes	Yes	Yes	Yes
Wyoming	Yes	No (Elderly and disabled only)	No	Yes 1

Source

“Significant Features of the Property Tax.” Lincoln Institute of Land Policy and George Washington Institute of Public Policy. Data accessed in December 2012 at http://www.lincolninst.edu/subcenters/significant-features-property-tax/Report_Residential_Property_Tax_Relief_Programs.aspx.

"—" indicates that no data is available.