Will Seniors Benefit From The Proposed Property Tax Relief? Someone Has To Pay

Will Seniors Benefit From The Proposed Property Tax Relief? Someone Has To Pay

Benjamin Franklin is famously quoted as saying “nothing is certain except death and taxes”.  However, who pays the taxes and how much is often a matter of political debate.  At the time of the writing of this article, our Texas House of Representatives and Senate are negotiating on the form of property tax relief that will be given to Texans.  This may not be limited to your homestead (which is usually the most valuable asset of many).  The House and Senate proposals are considering “buying down” property taxes that could benefit landlords (residential non-homestead property) and owners of business properties. 

At the present time, an adult who owns a residence homestead who is disabled or is 65 or older (or the surviving spouse who is 55 or older) is entitled to a $10,000 exemption from taxation by a school district on the appraised value.  The Senate bill would increase the exemption from $10,000 to $30,000.  Additionally, the general residential homestead exemption would be increased from $40,000 to $70,000.  As a result, Texans over 65 would not be taxed on the first $100,000 of their appraised home value.  Seniors own approximately 40% of the homes in Texas.  Furthermore, there is a tax ceiling (frozen) once the homeowner is 65 or disabled.  However, it should be noted that the Texas Tax Code allows taxpayers 65 or older to defer homestead property taxes until their estates are settled after death (although the estate would have to pay interest as a result of the deferral) by filing an affidavit with the appraisal district.

One of the other bills passed by the Texas Senate would give $5.38 billion for the benefit of Texas public schools to help offset the lost revenue.  However, if those funds are eaten and the schools can no longer get adequate funds due to a downturn in the economy, what would happen?  It is likely that there would be a rise in property taxes, sales taxes or (what seems unthinkable in Texas) a state income tax.

The House property tax relief bill reduces the amount that the appraised can annually be valued from 10% to 5%.  Landlords, business owners, grocery store or restaurants would also benefit from a lowered cap of an appraisal.  This would give a big break to owners who hold on to a property for a long time.  Furthermore, cities and school districts would likely raise tax rates to offset the appraisal cap limit.   Savings from lower property taxes would not likely be passed to renters (whether the renter be residential property or not).  As a result, anyone who does not own property (including a senior or someone disabled) will fail to benefit from the property tax relief bill.

Furthermore, although most will undoubtedly be in favor of property tax relief, the economy will not always be as booming as it is today and all will have to pay some form of increased taxes.  Thus, if one is a renter, they would probably prefer a reduction in sales tax.  Essential services could be cut at a later date if revenue declines.  Texas voters will need to decide, but it is likely that whatever the House and Senate decide will be passed in an election.

Finally, although property tax relief may not effect estate planning (other than to own real estate and perhaps hold on to it), deeding your residential homestead into a revocable living trust and certain irrevocable trusts will not adversely affect the homestead designation with proper language in the trust.  Thus, those who have a trust created from a state other than Texas should have their trust reviewed as this is state specific.   

If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.

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