Senior Legal Line: Get help paying your property taxesA legal question-and-answer line for senior citizens. This month's topic: The Minnesota Department of Revenue's Senior Citizen Property Tax Deferral program.
By: Senior Citizens’ Law Project, Budgeteer News
Dear Senior Legal Line:
My wife and I are having trouble paying the property taxes on our house. We live on a fixed income of Social Security benefits and do not have any savings to dip into to pay the taxes. We do not want to get a reverse mortgage at this time. We do not want to sell, since we have lived in our home for over 25 years and, even though we are both over 75, we are still able to live independently. Is there a way to get help paying our property taxes?
The Minnesota Department of Revenue has a program that may help: the Senior Citizen Property Tax Deferral program. The program is designed to help seniors who are having difficulty paying their property taxes. It is not a tax forgiveness program – it is basically a low interest loan from the state.
If you qualify, the way it works is that when you apply, the state determines what your portion of the property taxes will be under the program. Your portion is limited to three percent of your annual household income. So, for example, if your and your spouse’s annual income totals $25,000, the annual property taxes you would pay would be
three percent of $25,000, or $750. Your portion does not change while you are on the program. The state pays the rest of the taxes, called the deferred portion, to your county. The portion that the state pays is a loan to you and it will accrue interest (up to a maximum of 5 percent per year). It also becomes a lien on your home.
To qualify, at least one homeowner must be 65. The other spouse must be at least 62 years of age. The total household annual income must be below $60,000. At least one of the homeowners must have owned the house as his or her homestead for 15 years prior to the date of application. The home must be free of any federal or state tax liens or judgment liens, and the mortgages and other encumbrances on the home cannot exceed 75 percent of the assessor’s estimated market value of the home. In your case, you appear to qualify since you are over 65, your only income is social security benefits so it is likely your household income is less than $60,000, and you have lived there for more than 15 years. If you do not have any federal or state tax liens, other judgment liens, or excessive mortgages on the property, you seem to be eligible. Also, when you apply, in order to prove what sort of encumbrances (liens, mortgages) are on the property, you have to pay for a report. If your home is an Abstract property, then it will probably cost approximately $50 to have an abstractor do the “Owners and Encumbrances” report. If your home is a Torrens property, it will cost approximately $10 for a copy of the original “Certificate of Title” from the County Recorder’s office. If you do not know what kind of property you have, contact your County Recorder’s office. The application deadline is July 1, in order to defer the following year’s property taxes.
The advantages on the program are affordability and predictability. While on the program, you know what your taxes will be and since it is three percent of your income, it will probably be affordable to you. You won’t have to sell your home and won’t lose your home to tax forfeiture since you will be able to pay your taxes.
Of course, since it is a loan, it will eventually have to be paid back. The state will get repaid while you are on the program by getting any income tax refunds, lottery winnings, or refunded political contributions that you are entitled to. While on the program, you won’t be entitled to any property tax refunds. You can continue on the program as long as you stay eligible. The program will stop if you sell or transfer the property; the home no longer qualifies as your homestead; you voluntarily stop the program; or if your income climbs above $60,000 per year. If your income goes above $60,000 you must inform the state so that the state’s payments to the county will stop. If you income falls again, then you may go back on the program. If you fail to inform the state that your income increased over $60,000, then you are subject to penalties. Once the program stops, the amount that the state paid out on your behalf has to be repaid to the state.
In your situation, this program may be a nice alternative to a reverse mortgage. If you have any questions about the program, you may contact the Minnesota Department of Revenue at (651) 296-0333 or (651) 556-6088, or go to their website at www.taxes.state.mn.us. You may pick up the application from your local County Auditor’s office.
This column is written by the Senior Citizens’ Law Project. It is not meant to give complete answers to individual questions. If you are 60 years of age or older and live within the Minnesota Arrowhead Region, you may contact us with questions for legal help by writing to: Senior Citizens’ Law Project, Legal Aid Service of Northeastern Minnesota, 302 Ordean Bldg., Duluth, MN 55802. Please include a phone number and return address. To view previous articles, go to: www.lasnem.org. Reprints by permission only.