Apr

Property Taxes: Get Your Deduction

Property Taxes are a large portion of your total mortgage payment

You must file for your real estate exemptions and you must do it in a timely manner.

You must ensure that you have all the eligible deductions filed, and have done so in a timely manner.

Property Tax Deductions Changes Beginning 2009 Payable 2010.

Property tax for 2009 payable 2010 brings the best of both worlds. Beginning in 2009, if a deduction is in place on March, that deduction will be applied to the property taxes first due and payable in the following year regardless of changes in ownership or eligibility. In addition, if an individual (Buyer) completed and dated a deduction application on or before December 31, 2009, and it was filed with the county auditor on or before January 5, 2010, that deduction will be applied to the 2009 payable 2010 property taxes. If the Seller has the deduction as of March 1, he keeps it for that year. If the Seller does not have deductions in place, the Buyer can put them in place by December 31. This rules applies to the Seller’s deductions for VA, Over 65 deductions, homestead and supplemental homestead, and mortgage deductions, even if the Seller is the owner of another property, deceased or moved to a nursing home or assisted care without the intent to return. It does not apply to exempt status such as “not-for-profit” and “government” ownership. If those entities are not in title as of December 31 of a given year, the exempt status will not apply.

Mortgage Deduction

The mortgage deduction has different criteria for qualification than that of the homestead deduction. In addition to being the Owner and filing before December 31, you must also have a mortgage balance of not less than $3,000.00 as of March 01 of the filing year. Therefore, if you are closing after March 01, you can still file for the deduction but it won’t apply to the taxes until the following year; however, you may benefit from the prior mortgage deduction held by the Seller (or in the event of a refinance, your prior mortgage). Buyers/Borrowers will still be required to file for the deduction with the county auditor or county recorder and cannot file at the closing table.

Eligibility for Trusts

A Trust is entitled to the homestead standard deduction for property owned by the Trust and occupied by an individual that has a beneficial interest in the Trust.

Marrying Couples Multiple Benefit

An individual or married couple cannot receive more than one homestead deduction on multiple properties even if titled in individual names. However, this limitation does not apply in the first year for which a homestead deduction is claimed if the sole reason that deduction is claimed on other property is that the individual or married couple maintained a principal residence at the other property on the assessment date (March 01) and the individual or married couple is moving the individual or married couple’s principal residence to the newly purchase property.

Example:
John Smith owns his home on March 01 and Jane Dow owns her home on March 01. Only July 01 they become Mr. and Mrs. John Smith and buy another home and reside in that property before December 31 and file for the homestead deduction. They are entitled to three homesteads for only that year. The following year they will only be allowed the deduction on the new home regardless of whether the prior properties are still in their individual names.

Verification of Homestead for Existing Homeowners

With the 2010, 2011, and 2012 property tax bills, a homestead verification form will be sent to all taxpayers currently claiming the homestead on a property. The taxpayer will be required to complete this rose-colored form to verify that the property is, in face, their homestead and provide the last five digits of their social security number and driver’s license number (as is required of all new filers) so that the homestead database can be populated. As long as the taxpayer completes this form in one of those three years, there is no requirement to re-file for the deduction as long as no other changes occur on the property. If there is a change, an individual who fails to file a statement with the county auditor regarding the change is liable for any additional taxes that would have been due on the property if the individual had filed the statement PLUS a civil penalty equal to 10% of the additional taxes due. The civil penalty is in addition to any interest and penalties for delinquent payment that might be otherwise due.