Should Residents of 55+ Communities Pay Less Property Tax?

Tiny, colorful model homes on stacks of coins.
Property taxes can be confusing, but we have all the details for 55+ communities.

When active adults start to plan their next move, they often consider moving to a tax-friendly retirement destination and finding their next home in a 55+ community. Over the years, states like Florida, Arizona, and Texas have become some of the most popular places for retirees to live with like-minded people. But one of the big factors that impacts where active adults decide to move is cost.

Active adults often have a particular budget in mind. In addition to the sticker price of a home, however, active adults may need to plan for other expenses, like utilities, repairs, and real estate taxes. Homeowners may start to wonder, “Do senior citizens pay property taxes?”

If you’ve asked yourself this question, keep reading to find out everything you need to know about property taxes for active adults living in 55+ communities. There’s a range of property tax exemptions for those qualified seniors who know where to find them.

How Property Taxes Work

A wood house model on top of blocks spelling "TAX."

The first step in learning if senior citizens pay less property taxes is to define what property taxes are and how they work. Property taxes are unlike other taxes because they are not dictated or requested by the IRS and the federal government. Local governments levy property taxes from property owners in their jurisdiction.

Property owners can be taxed by the local municipality, the local school district, the county, and the state, although most areas conveniently combine these taxes into one property tax payment. Property taxes vary greatly from one county or state to another, and even homeowners in the same state can pay different amounts of property taxes based on the location of their town or city. This makes property taxes an important consideration when choosing a home.

The due date for property taxes also varies from place to place. Some locations only require annual payments, like Florida, while others have quarterly and biannual payment periods. With so many variables, it’s important to double-check the local property tax breakdowns and due dates for your district.

What are they based on?

A row of wooden home models and stacks of coins beside a man calculating his property taxes.

The way that local governments assess and calculate property taxes is a complex topic that differs greatly across the country. The amount that homeowners pay in property taxes is known as a tax percentage or “mill levy.” The tax percentage homeowners need to pay varies depending on how much money local governments determine they need to fund public goods and services.

Usually, a local tax appraiser will appraise properties every one to five years. A tax appraisal takes several factors into consideration when calculating the value of a property, including the size of the property, its location, the current state of the market, whether it’s vacant or not, and what kind of shape it’s in. Some localities might also consider the property’s market value, or what it would approximately sell for if it went on the market today.

Whether the local government uses an appraisal or the market value, they come up with the assessed value of a property that is to be taxed. Luckily, property owners do not usually have to pay the full value of their property’s assessed value. Instead, local governments use an assessment ratio, which is the percentage of a property’s value that will be taxed, which can be something like 60%. Then, the taxable ratio of a property’s assessed value is multiplied by the mill levy to determine what’s owed on property taxes.

What are property taxes used for?

A row of desks in a public school.

Property taxes can be used by cities, counties, and states to accomplish a wide range of public works projects as well as maintain existing services and spaces that benefit local communities.

One of the primary uses for property taxes is to fund local public schools. The funds go towards paying the salaries of teachers and staff, maintaining school buildings and facilities, providing children with supplies and meals, and funding after-school programs and athletics.

Property taxes also fund essential public services provided by local safety and fire departments. Police officers, EMS workers, and fire departments are all paid using property taxes. These services and individuals are an important part of the duty of a local government to keep its population safe and protected.

Public and community spaces are maintained and built using taxes levied from property owners. Infrastructure like streets, sidewalks, walking trails, and bridges are maintained and built by these taxes as well as, but not limited to, natural spaces such as parks, waterways, and wildlife reserves.

A number of services are also funded by property taxes, like public libraries, animal shelters, social services and programs, public housing, snow removal, festivals and fairs, and educational opportunities. Sanitation services receive funds from property taxes as well, like trash pick-up, sewer and stormwater management, and street cleaning.

How are they changed?

A hand casting a vote in a ballot box.

Property taxes can and do change over time. The amount that homeowners pay in property taxes can vary based on a number of factors. For example, when a property’s market value increases due to home improvements or economic growth in the surrounding area, the property taxes grow proportionately. However, there are also reasons that property taxes can decrease, most commonly through voted increases or exemptions and freezes.

Voted Increases

A local government council can vote on proposed changes to the amount property owners are taxed. A reason for this could be that they deem more funds are needed for public employees or maybe a project is proposed, such as improving roads in an area or rebuilding a bridge. The locally appointed officials would then vote on the matter, which could result in a change in the property tax.

Exemptions and Freezes

Alternatively, property owners may qualify for exemptions or freezes that would allow them to decrease the amount paid in property taxes or at least not be subject to paying more if they increase. Homeowners who are eligible to freeze their taxes can make it so that the amount they pay remains the same even if their property is assessed at a higher value or if the local tax authority raises the rates.

Homeowners, especially those who are active adults, may also qualify for exemptions and tax breaks that would decrease or nullify their required property taxes.

Common Senior Property Tax Exemptions

Closeup on a Tax Exemption form beside a keyboard and a pen.

Active adults may be eligible to receive special exemptions from property taxes that help ease the burden of these expenses. Are you wondering, “What is a senior exemption for property taxes?”

Senior property tax exemptions are a result of the unique problems property taxes pose to retirees and active adults on set incomes. One such issue is the possibility for property tax rates to increase while the incomes of retirees are often a set amount not subject to change. 

It’s worth noting that senior property tax exemptions don’t change the tax rate that’s to be paid, nor do they always eliminate the taxes altogether. Rather, tax exemptions might decrease the percentage of a home’s assessed value to be taxed or offer a reduction on the amount owed. Property tax exemptions basically offer a discount on property taxes.

Keep in mind that the agencies that collect property taxes will not go out of their way to inform property owners of available exemptions. This means that active adults need to do their own research to discover what tax breaks are available and how they can be claimed.

Like the property taxes themselves, exemptions for seniors vary greatly between cities, counties, and states, providing another reason for homeowners to check with their local tax collectors for available exemptions. With any senior citizen tax exemption for property taxes, homeowners should work with trusted tax authorities to find eligible benefits.

Senior Citizen Homestead

The Senior Citizen Homestead Exemption is one tax exemption available to active adults who meet the eligibility requirements. The eligibility requirements and benefits vary from state to state, but the Senior Citizen Homestead Exemption usually provides heavy discounts to the amount active adults need to pay in property taxes up to a certain amount.

For example, in Nassau County, Florida, 65+ active adults may be exempt from paying up to $50,000 in property taxes as long as the adjusted gross income of the household doesn’t exceed $35,167, among other requirements. To receive this exemption, most tax agencies require active adults to fill out and submit forms along with proof of income.

Senior Citizen Assessment Freeze Exemption

The possibility of local property taxes to increase poses a threat to active adult homeowners who receive income sourced from retirement accounts and stable monthly social security benefits. Because of this, many states have implemented Senior Citizen Assessment Freeze Exemptions that address this issue.

Active adult homeowners eligible for Senior Citizen Assessment Freeze Exemptions are able to lock-in or “freeze” the amount of property taxes that they pay for any given year in which they qualify. This means that if a homeowner freezes the amount due on property taxes in 2023 and the assessed value of their property increases in 2024, the homeowner will pay the same amount they did in 2023 instead of an inflated amount.

With that said, if an assessed value taxed on a property decreases instead of increases, homeowners don’t have to worry about the “frozen” tax amount preventing them from paying less. Most states have conditions that will make the lower amount the new base payment on property taxes.

Senior Citizen Real Estate Tax Deferral

Senior Citizen Real Estate Tax Deferrals allow eligible active adults, usually those 65+, to defer on their loans and postpone property tax payments. Homeowners who use this option can delay the payment of their property taxes or pay the full amount over a period of time instead of all at once. When a homeowner defers on their property tax, it becomes a lien that gathers interest until it’s paid off.

Of course, the requirements for Senior Citizen Real Estate Tax Deferrals differ from state to state as well as their terms, payments, and interest rates. In many cases, the deferral acts as a loan from the state that the active adult would use to pay their property tax. Then, the loan is repaid to the state with interest. For example, Whatcom County, Washington has a 5% interest rate for deferrals while Lake County, Illinois has a 6% interest rate.

Veterans’ Homestead Exemption

Honorably discharged veterans with disabilities are likely eligible for some form of property tax exemption that may even cover the costs completely. This nationwide effort to offer tax benefits to veterans of the United States military was initiated to offset the financial strain for those who served the country.

Depending on the disability rating calculated by the government, some disabled veterans may receive full property tax exemption in states like Alabama, Arkansas, California, and many more. These benefits and exemptions vary from state to state, so veterans should contact their local tax assessor’s office to learn what exemptions they qualify for.

Disabled Persons’ Homestead Exemption

An active adult may qualify for a Disabled Persons’ Homestead Exemption on their property taxes if they have a long-term disability. In most cases, “long-term” means lasting at least 12 months or resulting in death. Disabilities come in many forms, from blindness to debilitating diseases, and active adults suffering from one of these conditions can check with their local tax assessor to see if they would qualify for an exemption.

The compensation offered to qualifying disabled persons varies from state to state, but usually these exemptions lower the assessed value of a homeowner’s property so that homeowners pay less when it comes time to submit property taxes. For example, in Lake County, Illinois, those who are eligible for the Homestead Exemption for Persons with Disabilities lowers the assessed value of their property by $2,000.

Why Active Adults Should Pay Lower Property Taxes

Bags of money labeled "TAX" on top of stacks of coins.

Most states and counties around the country agree that active adults should pay lower property taxes, which is proven by the exemptions offered. However, this issue is still discussed and voted upon by lawmakers and tax authorities everywhere. There are many reasons to argue why active adults should receive exemptions from property taxes.

One reason is that property tax exemptions for active adults help protect homeowners from being taxed out of their homes. With constantly fluctuating market costs for real estate, it’s possible for a homeowner’s property to be assessed higher than it was in years past, making the property tax more expensive. The problem is that many seniors lie with set incomes from retirement funds or social security, making it difficult or even impossible to compensate for higher property taxes. Exemptions help alleviate this problem.

Another argument for why active adults should pay lower property taxes is that they no longer have use for the services paid for by their taxes, namely public schools. If active adults don’t have any children or grandchildren that attend local public schools, it may be hard for them to rationalize why they should pay for other people’s children to go to school.

Some active adult communities are so large that they consume entire zip codes and towns, creating a population that’s almost entirely active adults with no use for public schools. For homeowners in those kinds of communities, it may not make sense for school expenses to be included in their taxes when there are no schools.

The Benefits of Paying Property Taxes

Mature female friends smiling and having fun in their 55+ community.

While active adults do and should receive exemptions for property taxes, it’s important to remember that property taxes are a vital and necessary part of living in thriving, healthy communities. Not only do property taxes help keep infrastructure functional and provide services that benefit everyone like waste management, but they also keep us safe by funding police and emergency services.

The topic of whether active adults should pay property taxes for public schools is debated, but homeowners should view public education as a responsibility of every citizen to better our communities and society as a whole. A well-educated community helps everyone and lowers crime rates, and good schools bring in younger families, who stimulate the local economy.

Conclusion

Homeowners who want to move to an active adult community may ask themselves, “Do residents of 55+ communities pay less property tax?” The answer is actually yes, as long as seniors qualify for tax exemptions that their local tax assessor’s office offers.

But if you’ve ever asked yourself, “At what age do seniors stop paying property taxes?” The answer to that one, unfortunately, is that homeowners may never stop paying property taxes. But homeowners in the know can seek out property tax exemptions that can greatly reduce the amount paid to taxes.

Active adults worried about increasing tax burdens on a fixed income should contact their local tax assessor or look online to see how they can apply for the senior homestead exemption in their area as well as any senior citizen assessment freeze programs that are put in place to offset rising tax costs.

For those living in 55+ communities, especially larger ones, there may be local exemptions that lower the cost of public school taxes on top of other exemptions already in place. Since property taxes and their exemptions are so variable from state to state and city to city, finding out what’s offered to you in your own locality will likely save you money when it comes time to pay property taxes.

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