These Property Tax Exemptions Could Save Home and Business Owners

Standard federal tax deductions and state and local exemptions can save homeowners and business owners thousands of dollars each year. Both types of deductions provide unique savings for specific groups of individuals who are entitled to benefits.

Tax exemptions give taxpayers the right to subtract some portion of their income to reduce their federal and state tax liability. Individual taxpayers can use exemptions to shelter a portion of their income or reduce the value of their property tax that is owed on personal property. When taxpayers are business owners, exemptions can significantly reduce taxable income and even completely wipe out taxes for certain businesses and non-profit organizations. For individuals who are already tied to costly mortgage payments and insurance coverage for accident protection, property tax exemptions can provide relief.

Standard and Itemized Deductions

Individual taxpayers can choose to claim a standard deduction or itemized deductions to reduce their tax liability each year. The difference between standard and itemized deductions comes down to simple math. While a standard deduction lowers income by a fixed amount, itemized deductions include a list of eligible expenses. Taxpayers can claim whichever provides the lowest tax liability.

In 2021, the standard deduction for single taxpayers and married couples filing separately increased to $12,550; for heads of households $18,800; and for married couples filing jointly $25,100. Most taxpayers who do not own property or have major expenses claim standard deductions. For others, itemizing deductions can provide benefits if the following conditions exist:

  • Itemized deductions total more than standard deductions
  • High out-of-pocket medical and dental expenses
  • High uninsured casualty losses for theft, fire, flood, and wind damages
  • Large donations to charitable organizations
  • Gambling losses
  • Expenses related to work injuries and disabilities

State and Local Exemptions

State and local governments allow property owners certain exemptions from real estate taxes on owned property such as homes and vacant land. Although these exemptions may vary among states and local municipalities, common property tax exemptions include:

Homestead

These exemptions apply to taxpayers who own homes used as their primary place of residence for most of the year. Homestead exemptions do not typically apply to vacation homes, even if they are located in the same state and occupied for part of the year.

Age and Disability

Seniors and disabled taxpayers may qualify for property tax deductions. For qualified seniors, assessed property value can be reduced by $8,000. New laws allow automatic yearly renewals for qualified seniors. Although qualifications can vary by taxpayer age and state, most taxpayers are required to show proof of age and financial need to qualify for exemptions.

Disabled taxpayers are also allowed to claim property tax deductions. In most states, disabled individuals must become disabled during the filing tax year, and they must claim their disability in each consecutive future tax year.

Public Service

Military veterans, active service members, and surviving family members of deceased service members may qualify for tax exemptions in some states and local jurisdictions. Some states also allow exemptions for public service workers such as police, firefighters, and ambulance or EMT workers.

Home Improvement

This tax exemption allows homeowners to increase their home value without increasing their property taxes for at least four years. Homeowners can claim up to $75,000 in home improvements that are verified by their State Assessor’s Office.

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