Estate Planning Tip: You May Be Able to Qualify for a Real Estate Tax Exemption
Did you know that seniors are eligible to reduce their real estate property tax bill if they meet certain state and local requirements? As part of the estate planning process, proper counseling should also include taking full advantage of tax programs that are available to alleviate the tax on your estate while you are alive as well as after you die. For example, in Maryland, Virginia, and District of Columbia, there are programs allowing credits to be applied against your property tax bill, as long as the property taxes exceed a fixed percentage of your gross income.
Basically, this places a limit on the amount of property taxes you must pay based upon your income. However, each state has specific requirements that must be met before you can access this tax exemption program. For example, in Maryland, you must meet the following four requirements:
You must own, or have a legal interest, in the property. The dwelling on which you are seeking the tax credit must be your principal residence where you live at least six months of the year, including July 1, unless you are a recent home purchaser or unless you are unable to do so because of your health or need of special care.
Your net worth, not including the value of the property on which you are seeking the credit or any qualified retirement savings or Individual Retirement Accounts, must be less than $200,000.
Your combined gross household income cannot exceed $60,000.
For more information on the Maryland property tax credit program, check out this link.
As mentioned, Virginia and D.C. have similar programs. For example, in Virginia, there is a program offering property tax relief for “older” Virginians who are age 65 and older, or who have a qualifying disability. Like the Maryland program, there are certain income limits to qualify for the program. If you qualify, your property can be exempt from paying a certain amount of property taxes.
So what does all this mean? Well, it means that you should not only look to avoid paying unnecessary taxes, but also take advantage of the programs available to alleviate your tax burden. For more information, sit down with an experienced estate planning attorney in your area.