Property Tax Relief for Seniors

 

Cities and towns offer an array of options to help seniors cope with rising property tax bills such as exemptions, deferrals, and in some municipalities, a program that exchanges work for a reduction in an eligible senior’s tax obligation.

Without further ado, let’s take a look at the pros and cons of each of these options. Exemptions are contained within Massachusetts General Laws Chapter 59, Section 5 unless otherwise noted. All eligibility requirements are as of July 1, and applications are due in the Assessor’s office by April 1. As noted in my previous post, Chapter 7 of the Massachusetts Division of Local Services Training Course 101, Introduction to Assessment Administration:  Law, Procedures and Valuation is an excellent source of information on this complex subject. 

Exemptions

Senior Exemptions - Clauses 41, 41B, 41C and 41C½

These exemptions apply to seniors only. Eligibility requirements vary between Clause 41 and local option clauses 41B through 41C½. 

 

Age: Clause 41 and local option 41B applies to seniors who are 70 years of age, whereas local options 41C and 41C½ reduce the eligibility age to 65.  

Exemption Amount: $500 for Clauses 41, 41B, and 41C; 41C may be raised to $1,000 by a vote of the local governing body. Clause 41C½ provides for an exemption equal to 5% of a town’s average assessed valuation of residential property; this may be raised to 20% by a vote of the local government.

Domicile/Ownership: Clauses 41, 41B, and 41C require 10 consecutive years of domicile (primary residence) in Massachusetts as of July 1; for Clause 41C, that requirement may be reduced to 5 consecutive years. If the applicant owns the property with anyone other than a spouse, the exemption amount will reflect the percent of ownership in the property.

Income/Assets: Each clause has a different requirement. As I noted in my previous post on exemptions, income is measured as gross receipts (income from all sources) and assets as whole estate (retirement accounts, stocks, bonds, cash, etc.). For Clauses 41, 41B, and 41C, income limits usually rise annually along with the Consumer Price Index (CPI); municipalities may vote to increase income limits further for 41B and 41C. For Clause 41C½, a local option vote can change the requirement to include all household income, not just that of the applicant. For assets, Clauses 41, 41B, and 41C have increasing asset limits; Clause 41C may, through a municipal vote, exclude the value of the applicant’s domicile up to a four-family house. Clause 41C½ has no asset limits. Asset limits, where applicable, generally increase each year according to the CPI.

Senior, Minor Child with Deceased Parent and Surviving Spouse Exemptions - Clauses 17, 17C, 17C½ and 17D

For seniors, these exemptions may be easier to obtain than the Clauses 41 through 41C½ because the eligibility requirements are less stringent. The exemption amount is also less than allowed for Clauses 41 through 41C½.

To be eligible, the applicant must be at least 70 years of age, and the whole estate requirements exclude items like household furnishing and cemetery plots. Mortgage balances on the applicant’s domicile and other real estate holdings are also excluded (or a percentage thereof, if not wholly owned by the applicant and spouse). The residency requirement is 10 years domicile in Massachusetts for Clauses 17 through 17C½ and 5 years for 17D.

Financial Hardship Exemption - Clause 18

This exemption applies to seniors who are experiencing financial hardship due to mental or physical infirmity. The eligibility requirements are set by local assessors and exemptions are granted at their discretion, allowing the flexibility to consider each case individually while treating all applicants equitably. Many towns, including Shutesbury, have adopted this exemption. Prospective applicants should contact their local Assessors Office for more details.

Low Income/Low to Moderate Income Seniors Exemption for Community Preservation Act - Chapter 44B

As part of the Community Preservation Act (CPA), this exemption must be adopted by each CPA community. Eligibility is restricted by annual income, and those limits differ depending upon whether the applicant is under or over the age of 60. The amounts vary from year to year and are based on the area’s median income levels according to the U.S. Department of Housing and Urban Development. Shutesbury has adopted this exemption.

Annual income figures are gross income minus each non-spouse dependent as well as out-of-pocket medical expenses.

For example, the fiscal year 2021 income limits for Shutesbury residents were as follows: For a non-senior, two-person household the limit was $53,056 annually while for a senior household the income limit for two people was $66,320. 

Optional Senior Exemption - Clause 57 

This exemption is adopted by local option and is based on the Massachusetts Senior Circuit Breaker Tax Credit which allows for a refundable credit on a resident’s Massachusetts income tax based on the property taxes paid on their primary residence.

To be eligible, an applicant must be age 65 by the end of the tax year. Income limits apply whether the domicile is owned or rented. For 2021, the maximum credit is $1,170 and a taxpayer will receive a refund from the state if the credit for which they qualify is greater than the amount of income tax owed.

In cities and towns that adopt Clause 57, seniors who qualify for the circuit breaker credit would be eligible for an exemption up to the amount they received in the previous tax year. Because this clause is by local option only, funding for this exemption is not refunded by the state and must be borne by the municipality.

Shutesbury has taken the first steps toward the adoption of this exemption. At the 2021 Annual Town Meeting, voters passed Article 18, requesting the legislature to pass language allowing the town to offer a Clause 57 exemption. 

Other Ways for Seniors to Seek Tax Relief

Senior Citizen Property Tax Work-Off Abatement Program

Eligible seniors can opt to work for their local government and earn a tax abatement of up to $1,500 to be applied to their annual property tax bill. To be eligible, applicants must be at least 60 years old and must be the owner of the property on which taxes are to be abated, though the property need not be their domicile. Municipalities must credit the work using at least the federal minimum hourly wage rate but not more than the state minimum wage rate.

Municipalities adopting this local option may vote to substitute 125 hours of work for the $1,500 maximum benefit and to allow a proxy to perform such duties in cases where the homeowner is physically unable to do so. 

As a local option program, municipalities have the flexibility to develop rules on income and asset limits, dates of eligibility, and/or the number of seniors participating in the program. Seniors may be eligible for and participate in the work-off program in addition to receiving another tax exemption. Shutesbury has not adopted this program.

Any abatement is subject to the 6.2% Social Security tax and the 1.45% Medicare tax, which will reduce a $1500 abatement to $1385.25.

Senior Tax Deferral Clause - 41A

Another option open to seniors aged 65 or older is property tax deferral. The tax is not forgiven but is deferred until the owner dies or the property is sold. As is the case with exemptions, application is yearly, with income, asset, ownership, occupancy, and domicile requirements that must be met by July 1. The application deadline is April 1.

Eligible seniors can defer all or part of their tax obligation. They can still obtain exemptions as long as they meet the requirements, and defer the remainder of their tax obligation. Deferment can help seniors stay in their homes when financial need is the primary concern and other options have been exhausted. 

Qualified seniors are required to sign a Statement of Entry into Tax Deferral and Recovery Agreement with the Assessors Office. This document will be recorded at the Registry of Deeds as a lien against the property.

Interest on deferred taxes accrues at a rate of 8% unless the municipality votes to apply a lower rate. Payments may accrue as long as the accumulated amount does not represent more than 50% of the property’s fair cash value, prorated in cases where the applicant’s interest in such property is less than 100%.

Next in this series, we’ll discuss progressive taxes and the residential exemption.

Weekly Factoid:

 

The Massachusetts Homestead Protection Act of 2010 protects $125,000 of home equity against creditors without filing and up to $500,000 for those who file. Though Massachusetts does not provide a tax exemption within its Homestead legislation, the state’s high level of equity protection—and the nominal  $35 filing fee—makes it the cheapest insurance available to Massachusetts homeowners.