Property taxes are generally tied to the value of your property, so, in and of itself, retirement won't impact your property taxes. However, lifestyle changes in retirement might reduce your overall property tax liability. At the same time, many governments provide property tax rebates or reductions or increase caps for older residents.
Some states will reduce your taxes if you reach a certain age and, sometimes, if you meet income limits. For example, as of 2013, Florida will exclude $50,000 of your primary home's value from taxation if you're at least 65 years old and have an adjusted gross income of $27,590 or less. North Carolina will exclude $25,000 or half of your home's value, whichever is more, from taxation as long as you're 65 or older and meet the state's income limitation. Some Massachusetts communities also offer a $500 to $1,000 property tax rebate, but with a twist. You have to do volunteer labor to "work off" your property taxes, although you may also qualify for an additional exemption of up to $1,000.
Some states freeze your home's value for property tax purposes, protecting you from future property tax increases. For example, as of publication, Washington state will freeze the your home's property tax valuation and exempt you from special levies on your home once you turn 61, provided you qualify as having a relatively low income. New Jersey has a similar program that has a higher income limit.
Some retired people use retirement as an opportunity to change their living situation. If you move into a smaller and less-expensive home, you'll probably end up paying lower property taxes. On the other hand, some states that are attractive to retirees because of their low or non-existent income taxes make up for it through property taxes. Texas, Tennessee and Florida are three no-income tax states that make it up, to some extent, through higher property taxes.
Property Tax Deduction
You might also get additional benefit from your property taxes if retirement changes your income tax picture. If you were paying the alternative minimum tax before you retired, you weren't able to claim your property tax write-off, since it is one of the many deductions that the AMT eliminates. However, if your income changed in retirement and you began earning either a small-enough taxable income to avoid the AMT or if your investments are doing so well that you make too much money to pay the AMT, you'll be able to start writing off property tax again.
- Washington State Department of Revenue: Property Tax Exemption for Senior Citizens and Disabled Persons
- State of New Jersey Department of the Treasury: Property Tax Reimbursement General Information
- Kiplinger: How Can I Avoid the AMT?
- Minnesota Tax Payers Association: 50-State Property Tax Comparison Study
- Hillsborough County Property Appraiser: Homestead and Other Exermptions
- North Carolina Housing Finance Agency: Property Tax Relief for the Elderly and Disabled
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.