After decades of hard work, people in their golden years look forward to that moment when they can just finally sit back and relax. We can safely say that retirement is the last last leg of one’s life adventure. To spend these senior years in comfort would naturally be what most elders aim for. The importance of retirement planning is important as this gives senior citizens some sense of security. Life savings, government benefits and other financial programs which can assist them through this time can be fully maximized.
Inevitably, investments, most especially property acquired throughout one’s lifetime will entail tax costs even after retirement. Senior citizens must factor this in when managing their expenses as this will have an impact on them financially.
What is property tax?
Any individual who owns a piece of real estate property in the United States is subject to pay taxes to the local government. Property tax is implemented in all 50 states and is calculated based on this equation: the fair market value of the property times an assessment ratio times a tax rate. Property tax information varies as tax laws differ in each state. Figures change in every state as the government tax authority dictates value and tax limits in their local jurisdiction.
Property tax assessment may seem a bit complex but generally, the evaluation of one’s assets is based on a property’s market value at a certain date. In most states, property is assessed annually, while some jurisdictions assess home or land assets every other year or when the property is sold or transferred.
The importance of understanding property taxes is extremely vital. This is one tax element that should not be overlooked as failure to settle the levy which one owes to the government over a course of time can result to seizure of assets.
Property tax after retirement and exemptions for seniors
There is an ongoing government initiative which helps lighten the load for American retirees who are slated to pay property taxes of staggering figures. All 50 states across the United States provide varying property tax relief programs for senior citizens. Special exemptions are given to elderly property owners who meet certain age and income requirements.
Below are 5 helpful tips on how to manage property taxes after retirement:
- Be aware of the tax exemptions that you are entitled to as a tax paying senior.
Property tax exemptions are offered in several states across the United States. For example, Washington and South Dakota are two areas that provide this special exemption to its local residents. Mainly, this programs helps senior citizens and disabled people reduce their payment of property taxes. In a circular released by the state of Washington, “Under the exemption program, the value of your Washington State residence is frozen for property tax purposes, and you become exempt from all excess and special levies- resulting to a reduction in your property taxes.” Notably, this program covers a retiree’s primary residence and up to 5 acres of land. Seniors who are above 61 years old and have an annual income of $35,000 or less for the application year, meaning property tax after retirement will be exempt from all excess and special levies. Research the exemptions in your state to find out what you are entitled to. - Take advantage of tax deferral programs for retirees.
Tax deferral is a low-interest loan program that aids seniors in paying their annual property taxes. Similar to tax exemptions tax deferral programs are given to senior citizens in states such as Missouri, Minnesota, Oregon, Washington and Colorado, to name a few. Deferral programs may differ in each state. In Oregon, senior residents may borrow from the local government to pay property taxes to the county. Meanwhile in Washington, retirees who have an annual income between $35,000 and $40,000 are qualified to apply for the deferral program. Look up your state to see if a deferral program is available for you. - Check if property tax credits are available in your state.
This benefit gives credit to eligible senior citizens for a percentage of the property taxes or rent they have annually paid. Seniors who rent can claim a maximum credit of $750 while elderly homeowners can get a credit of up to $1,100 for the taxable year. However, for retirees who are renting, the Property Tax Credit will only be eligible if the tenant pays for the annual tax of the property they are leasing. - Retirement should not hinder you from paying your taxes.
That is the position government takes anyway – so it’s reminiscent of the saying two things are inevitable, death and taxes. There are programs to help the elderly live a more comfortable life after retirement. How you plan your retirement and manage your finances will also help you live the golden years of your life with greater ease. Paying your taxes may not be as much of a burden when you are informed of what you are entitled to in terms of benefits and financial assistance available to seniors. How to manage taxes will come easier if you are guided properly. Always check your state website for updates and information on benefits for senior citizens and retirees. - Understand what is at stake when you fail to pay your property taxes.
Non-payment of property taxes will take its toll on everybody. This has a negative effect in varying levels. Your credit score will definitely take a hit when you fail to pay your taxes over time. What’s worse, tax liens do not exempt senior citizens. Recognizing the repercussions of how this will affect you financially will enable you avert hitches in the long run. File your tax properly with the assistance that you can get from your state. Also, relating to the matters of credit worthiness, it is still best to have a clean credit record even in your retirement years.
Even in retirement, seniors must continue healthy financial practices such as credit checks and proper filing and payment of taxes. This not only allows them to keep their flawless financial standing, it also provides them with a hassle-free existence during this golden phase in their lives.
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