One of our favorite classes to present is Property Tax Chat. It’s not the most exhilarating topic on the Independence Title class menu. However, agents end up enjoying it and walk away with the valuable knowledge to add to their arsenal of information. In our class, the exemption that gets the most attention is the over 65 exemption.
There are three key elements to this exemption:
1. A reduction in value before the various rates are applied
2. Quarterly tax payments accepted
3. The Independent School District (ISD) tax amount is frozen
With the first element, the reduction in value will not affect the market value, only the taxable value. Also, keep in mind not all taxing entities will use the reduced value to calculate the taxes owed.
The second element is an option for the homeowner to make partial payments throughout the year. The flexibility of a payment plan can be helpful for seniors on a fixed budget.
The third element is where it gets a bit sticky but hang with me. The dollar figure you pay for the ISD portion of the tax bill at the time you turn 65, will be the annual amount due for the remainder of the time you own and occupy the property. That’s pretty straightforward, and it’s an incredible savings!
It gets tricky when the homeowner wants to transfer the exemption to another property. Let’s walk through a scenario. Let’s say your client is in their 70’s with the over 65 exemption in place on their current home. Now they want to live life to the fullest and buy their dream home. Once they purchase the new home and request a transfer of the exemption, the tax office will look at the percentage they’ve been saving on the school taxes to apply to the new home. Ok, are you saying to yourself, um what?! Let’s break down the math. The property that they sold had an ISD tax amount of $5000 without any exemptions, but when they turned 65 and placed the exemption on the property, the ISD taxes were only $2500 and froze at that amount. They’ve been saving 50 percent. Now let’s look at how that savings will affect the new home. The new homes ISD taxes are $8000 without any exemptions. Once the over 65 percentage gets transferred, they will only pay $4000, for the ISD portion of the taxes. Only the percentage is transferred not the dollar amount. Clear as mud? For more information on exemption and the tax cycle, talk with your business development representative about attending our Property Tax Chat class.