Property Tax 101: Exemptions, Credits, & Deductions

Part 2

In Part 1 of our discussion on property tax exemptions, credits, and deductions we touched on a higher-lever overview.  Today, we dive into a few of the more popular programs in the state.

A majority of the exemptions mentioned in Part 1 are targeted at organizations or entities that serve the public and add to the public good.  There are also a few exemption and deferral programs aimed at relieving the tax burden on certain groups of people.

Senior citizens/disabled persons can apply for an exemption if they are 61 years old or retired due to a disability and whose household income is $35,000 or less.  This exemption program, which was passed as a constitutional amendment in 1966, is a large one in the state.  According to the Department of Revenue, in 2009 (the most recent data available) $176.1 million in property tax relief was given to homeowners, which equates to an average savings of $1,555 per household – that’s no nominal figure! 

A related program for senior citizens/disabled persons is not an exemption program but a deferral program.  Under this program, seniors 60 years or older in a household that has less than $40,000 of disposable income can defer property tax collections until the property ceases to be the permanent residence  of the homeowner or surviving spouse.  The deferral then becomes a lien on the residence and is repaid from the proceeds of the estate.  In the meantime, the state reimburses local jurisdictions for lost revenue.  This deferral program isn’t as widely utilized as the exemption program.  In 2007, only 950 households took part in the program, compared to the just under 114,000 households that took part in the exemption program.
In 2005, a similar program was established for widows/widowers of veterans who died in the line of active duty.  In 2007, the legislature created a new deferral program for low-income households.  Those households with a combined income of $57,000 or less can qualify for the deferral program which allows taxpayers to defer half of their yearly property taxes; payment on the second half is then postponed until the residence is sold.

It is clear to see what the legislature’s priorities have been by looking at the history of property tax exemptions and deferral programs.  Those most vulnerable to losing their homes – seniors, low-income, and widows/widowers – are considered entitled to state assistance.  Do you agree with the legislature’s view?  Should we be subsidizing those in need?  Around the same time these popular programs were put into place, a Tim Eyman initiative (I-747) was voted into law, which restricted property tax valuations to 1% per year.  Clearly, Washington State residents were struggling with the cost of their property taxes and the legislature made an effort to help those most in need.