Common property tax exemptions, and who qualifies

Owning a home can come with plenty of expenses. Beyond your monthly mortgage payments and the cost of regular upkeep, you’ll also be responsible for paying property taxes. Property tax exemptions can be a useful way of decreasing what you owe — if you qualify. Here, we’ll explore some of the most common property tax exemptions, and who qualifies for them.

What is a property tax exemption?

Property taxes are typically based on the assessed value of your home and vary by state, county or municipality. They can make a significant dent in your budget, but obtaining a property tax exemption — meaning you are legally excused from paying — can reduce or even eliminate the amount of tax a homeowner is liable for.

Some exemptions may be based on the homeowner’s life circumstances, such as income level, age or military service. Others depend on the property itself, such as whether it serves as a primary residence or is used for agricultural purposes. Who is eligible for these exemptions can depend on a lot of factors, and varies by locale.

Property tax exemptions vs. deductions

Many people confuse the two, or even use the terms interchangeably, but there is a very important difference between a property tax exemption and a property tax deduction. A deduction simply lowers or decreases the amount of tax you’re liable for when tax payments are due. An exemption, however, means you are literally exempt from paying — it eliminates the need to pay property taxes altogether. You are legally excused from paying that tax.

Common property tax exemptions

Here are some of the most common property tax exemption scenarios. Keep in mind that eligibility rules can be complicated, so if you think you qualify for one, be sure to check with a tax professional and/or local government authorities, such as your state or county department of taxation.

Homestead exemptions

• Who qualifies: primary-residence homeowners

Some states offer a property tax exemption on a home if it serves as its owner’s primary residence. (This is not available for vacation homes or investment properties.) A homestead exemption may or may not be capped at a certain amount, depending on the value of the home. And it can sometimes take a few years for this exemption to kick in, so you may have to pay property taxes on your home at first, until you qualify.

Senior citizen exemptions

• Who qualifies: homeowners over the age of 65

In many states, you’re eligible for a property tax exemption as a senior citizen if you’re over 65, or will turn 65 by December 31 of that tax year. Age requirements may differ by state, and some states also require that your income be below a certain level.

Military exemptions

• Who qualifies: military service members and veterans

You may be eligible for a property tax exemption if you’re a U.S. military veteran, or an active service member. Some states limit military exemptions to disabled veterans or those with a lower income, so be sure to check the rules in your area carefully.

Disability exemptions

• Who qualifies: people with certain type of disabilities

If you are living with a disability, you may qualify for a property tax exemption or reduction. Some states only offer this exemption to low-income individuals, or to those with a specific disability rating.

First-time homebuyer exemptions

• Who qualifies: new homeowners

First-time homebuyers may qualify for a full or partial exemption on their property taxes. Typically, this exemption is only offered for the first few years of homeownership. Some states only offer this exemption if the home was purchased from a government agency or through a government program.

Low-income exemptions

• Who qualifies: low-income or financially disadvantaged individuals

Some states offer an exemption for individuals with low income or for those receiving the School Tax Relief (STAR) program. You may need to apply for this each year and provide proof of income to qualify.

Surviving spouse exemptions

• Who qualifies: widows or widowers of qualified exemptees

Property tax exemptions may also be available to surviving spouses of those who qualified. For example, if the property owner was a military veteran who passed away, the exemption eligibility may pass to the surviving spouse.

How to apply for a property tax exemption

Property tax exemptions can reduce or eliminate the amount of property tax you’re liable for. But the qualifications and application requirements vary from place to place, and each property and situation is different, so homeowners must be prepared to do their homework.

If you think you qualify for one or more exemptions, start with online research: This can include the websites of your local department of taxation, department of finance, veteran’s affairs agency, comptroller’s office or tax assessor’s office. It’s also smart to consult with a tax professional in the area. When applying, pay close attention to deadlines to be sure you get your applications in on time.

Bottom line

Property tax exemptions can greatly reduce or even eliminate your property tax liability. The most common types include homestead exemptions, military exemptions and exemptions for senior citizens or those with disabilities. Eligibility and exemption amounts vary widely by location, so some research is required to determine which you might qualify for and how to apply.