GRAY MATTERS
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Property Tax Freeze and Relief

Property Tax Freeze and Relief

Many seniors want to stay in their home for as long as possible. However, the expense of property taxes can be a major burden, especially for seniors on a fixed income. Often, the property tax bill can equal or exceed a senior’s full month of income.

The State of Tennessee recognizes this burden and has put in place programs to help certain elderly and disabled individuals pay their property taxes. Property tax relief is a program whereby the state will pay or reimburse a portion of the property taxes of a qualifying individual. The property tax freeze program allows counties to lock in the tax amount due so that is will not increase in future years.

There are two programs for tax relief. One is for elderly or disabled homeowners. The other is for disabled veterans or their widow(er)s.

Once qualified, the state will pay or reimburse the property taxes on the first $23,000 of appraised value of the person’s property tax. Because property tax rates vary between counties, the actual dollar amount of the relief varies as well. In Knox County, for example, the program provides a benefit of up to $145.00 a year. The individual must pay the normal tax rate on the appraised value above $23,000. In other words, if the senior’s home has a tax appraised value of $70,000, the state would pay the taxes on the first $23,000. The senior would still be responsible for the taxes on the remaining $47,000.

It is important to note that this program can apply to both city and county taxes. That means a Knoxville resident, for example, can get the full reimbursement amount twice. He or she can receive it once on the city taxes and once for the county taxes. In order to do this, the senior would have to apply separately to the city and the county.

 

Qualification For Elderly and Disabled Homeowners Tax Relief

In order to qualify, an individual must meet a number of income and other eligibility requirements. First, the person has to be elderly or disabled. To qualify as elderly, the applicant must be 65 or older during the year in which you apply. So, if you are applying for relief of your 2015 taxes, you must turn 65 before the end of 2015. To qualify as disabled, an applicant must have been rated totally and permanently disabled by the Social Security Administration before December 31 in the year you apply. You may apply for relief beginning the day you receive your tax bill until 35 days after the bill is delinquent.

The combined 2014 income of the applicant, the applicant’s spouse, and all other owners of the property cannot exceed $28,690. Note that the income of the applicant’s spouse counts, regardless of whether the spouse is a co-owner on the property.

Annual income includes income from all sources. This specifically includes, but is not limited to:

  • Social Security (after Medicare is deducted)
  • Supplemental Security Income (SSI)
  • Retirement or Pension benefits
  • Veterans’ Administration benefits
  • Workers’ Compensation
  • Salaries or Wages
  • Interest or Dividends

 

There is no asset test to receive tax relief. In other words, it does not matter how much money an applicant has or how much the home is worth. The test is how much income the applicant made in the last year.

A final requirement is that the applicant must own and use the property as his or her principal residence. Proof of residency may be requested. If a qualified individual owns multiple properties, they can only receive the relief on their principal residence. If the person is going to be away from the home for an extended period of time, he or she should notify the collecting official of the absence.

In order to apply, a senior will have to provide evidence of their age. A disabled individual will have to provide proof of their disability. In addition, an applicant may have to provide evidence of 2014 income, such as a tax return, 1099, or W-2.

Tax Relief For Disabled Veterans or Widow(er)

Many of the rules for Disabled Veterans and their Widow(er)s are the same, but there are significant differences. First, the benefit amount is different; the state will pay the taxes on the first $100,000 of appraised value. This was lowered from $175,000 last year.

The income limit is also different. The combined annual income for the disabled veteran, spouse, and all other owners of the property must be $60,000 or lower. Again, the income of the spouse counts, even if he or she is not a co-owner of the property. Prior to 2015, an income limit was not required. The same sources of income are counted, namely annual income from all sources. It is especially important to note for disabled veterans that VA benefits do count as income.

The disability requirements for a disabled veteran are more stringent than the disabled individual rules. There are three ways to qualify as a disabled veteran.

  1. The veteran has a total and permanent disability rating from a service-connected disability;
  2. The veteran has a 100% total and permanent disability rating from being a prisoner of war.
  3. The veteran has a service-connected disability that resulted in one of the following:
    1. Paraplegia; or
    2. Permanent paralysis of both legs and lower part of the body resulting from traumatic injury or diseases to the spinal cord or   brain; or
    3. Loss, or loss of use of, two (2) or more limbs; or
    4. Legal blindness

Please note that it is not enough to be rated 100% disabled from a service-connected disability. The veteran must have the permanent and total rating as well.

Tax relief will also be extended to the surviving spouse of a disabled veteran who was eligible for property tax relief when the veteran died. In addition to the qualifications for disability above, a spouse qualifies if the veteran’s death either:

  1. Resulted from:
    1. A service connected, combat related cause, or
    2. Killed in Action (combat related);
  2. Or resulted from being:
    1. Deployed, and
    2. Away from home base of training; and
    3. In support of combat or peace operations.

A surviving spouse must have been married to the disabled veteran at the time of death and can not have subsequently remarried.

Most of the other rules are the same as for seniors and disabled individuals. The veteran or widow(er) may only apply for relief on his or her primary residence. The disabled veteran or widow(er) can receive relief on both city and county taxes. Documentation of residence, income, and disability will be required. In addition, the applicant will have to file a consent form that allows the VA to disclose the veteran’s disability to the office. These forms can be found at the applicant’s county trustee’s office or at the city collecting official’s office.

Tax Freeze

The tax freeze program allows qualifying seniors to have the property taxes on their principal place of residence frozen. Unlike the Tax Relief program, the tax freeze is not mandatory. Individual cities and counties get to decide whether to participate in the program. Knox County, for example, has decided to implement a tax freeze program, but it is not available for Knoxville city taxes.

Once a homeowner is approved, his or her property taxes are frozen at a base rate. As long as the homeowner continues to qualify, his or her taxes cannot increase because of a higher valuation or an increase in property tax rates. There is an exception if the homeowner makes improvements to the property resulting in an increase in value, such as adding a new room or a pool. Also, property rates are not fixed if the homeowner sells the home and buys a new residence.

The freeze only applies to a homeowner’s principal place of residence. The applicant must be 65 or older at some point during the year that they apply. Finally, the senior must have income from all sources that does not exceed the county limit. Income limits vary by county. In Knox County, for example, the limit is $37,980 dollars a year. A list of income limits per county can be found at: https://www.comptroller.tn.gov/pa/pdf/TaxFreezeIncomeLimits2014List.pdf

Conclusion

Tennessee’s property tax relief and tax freeze programs provide an invaluable savings for many seniors. For more information, or to apply, contact your county trustee or city’s property tax collector. Applications for some jurisdictions, such as Knox County, can be found online. Other jurisdictions, such as the City of Knoxville, require an application in person or on the phone.

 

 

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