Washington State provides two very different programs for our "well-aged" homeowners to help pay property taxes. The most popular program, Senior Property Tax Exemption allows seniors making less than $35,001 to "freeze" the tax value of their home (in the eyes of the assessor) at the current rate. As the assessed value rises or falls, the taxable value will be billed upon the lesser of the frozen or market value. Other than the Emergency Medical Services Levy, this program exempts all excess or special levies that are in addition to the regular levies. Seniors can even exempt themselves from paying for regular levies if their income is $30,000 or below (maximum exemption up to 60K in regular levies or 60% of the homes assessed value). To qualify, you must be at least 61 years of age by December 31st of the application date. Renewals are sent out out at least every four years.
Other qualifications include:
- Primary residence for at least six months out of each year.
- Residence may qualify even if homeowner is temporarily hospitalized or in nursing care.
- Assessor will continue to annually determine market value for the property.
- Mobile homes may qualify even if the homeowner does not own the land.
- Must apply for exemption in the year before taxes are due.
- Spouses or domestic partners may continue program in event of applicants death.
- Income is based on all co-tenants that have an ownership interest in the property.
- Homeowners may rent out the property as long as the income is used for hospital or nursing home expenses.
The Property Tax Deferral program for seniors making less than $40,001 is a whole different animal. Under this program, the homeowner must pay back all the subsidized taxes or special assessments that have been paid on their behalf by The Department of Revenue... plus interest. The obligation of this repayment shall become a state held lien on the property for up to 80% of the homeowner's equity. The age requirement for the deferral program is at least 60 years of age by December 31st of application. In addition to what's been listed above for tax exemption status, other qualifications can be compared to obtaining a reverse mortgage!
- Tax/special assessment deferrals and interest may not exceed 80% of equity.
- Incomes less than $35,000 must apply for Prop Tax Exempt program before applying for deferral.
- Application must be made each year you want to defer.
- If applicable, mortgage or purchase contract holders that reserve for paying taxes must cosign the deferral documentation in front of a notary or said county assessor/deputy.
- Hazard insurance must be sufficient to cover the interest of the State of Washington or the amount deferred cannot exceed 100% of the land value.
Determining household incomes is very detailed in both programs. The tax implications for the deferral program as explained by Erik Mickelson, CFP is..."The taxpayers would merely get to report (and deduct) the full amount of taxes paid when the deferral comes due and they actually pay the tax …"
The intentions behind the deferral program are all well and good, some experts such as Meg Burns with FHA are taking a close look at these humanitarian programs as a solution for seniors in Reverse Mortgages who fail to pay taxes and other costs associated with home ownership. Oregon offers a very similar program as Washington's.
The growing popularity of these programs will undoubtedly cause title companies to keep a keen eye out for liens of this nature. Another great reason for buyers to obtain title insurance from the The Talon Group! Rob Porter, Sr VP, The Talon Group
Future post: Property Tax Deferral program is available for all limited income homeowners in WA State.
