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| Photo by Jen Theodore on Unsplash |
The Commonwealth of Massachusetts and its municipalities offer property tax exemptions that assist veterans, survivors of emergency personnel killed in the line of duty, blind persons, and senior citizens. The state offers most of these exemptions, and municipalities can expect at least partial reimbursement for implementing them. Others are local options, meaning the community votes to provide a particular exemption or increase the exemption criteria to bestow greater relief. In local option cases, other taxpayers in the municipality offset the loss of tax revenue.
Several Massachusetts communities, including Shutesbury, have adopted an additional local-option senior exemption called the Means-Tested Senior Property Tax Exemption. This exemption is based on the state “circuit breaker” tax credit and primarily uses age, residency, income, and assets to determine eligibility.
The State Senior Circuit Breaker Credit
For seniors, the Massachusetts Senior Circuit Breaker Tax Credit is a simple way to get some relief from high property taxes. For those aged 65 and older who meet the eligibility requirements, the Circuit Breaker ensures that homeowners won’t pay more than 10% of their income on property taxes and renters will get a break if 25% of their annual rent exceeds 10% of their income.
The maximum credit for tax year 2023 was $2,590, up from $1,200 for the previous year. Eligibility requirements include the above-mentioned factors and a restriction on the home's assessed value, which cannot exceed $1,025,000. Taxpayers must also file Schedule CB with their state tax return.
Shutesbury’s Means-Tested Tax Exemption: How it Works
Shutesbury’s 2021 Annual Town Meeting passed a resolution petitioning the Massachusetts legislature to pass a special law to create a Senior Means-Tested Senior Citizen Property Tax Exemption. Bill H.4559, presented by Representative Natalie Blais and Senator Joanne Commerford, was signed by the Governor on November 7, 2022.
The new exemption went into effect in 2023 and is available to any taxpayer who received the state Circuit Breaker tax credit. The details were discussed at the November 8, 2023, tax classification hearing, the annual public meeting whereby the town’s tax rate is set. In Shutesbury, the Select Board historically votes for a single tax rate, applied to all classifications: residential, commercial, industrial, open space, and personal property.
The residential class currently has a slightly higher rate than the other classes even though the Select Board voted for a single tax rate. That is because, as Shutesbury’s Administrative Assessor explained at the meeting, eight taxpayers applied for and received the Senior Means-Tested Exemption. As noted above, this is a local option exemption, meaning that tax revenue uncollected due to the exemption is divided among the remaining tax-paying households in town. This raised the residential tax rate from $17.81 to $17.84 (the Assessors webpage lists the current residential rate as $17.83).
The Select Board must vote on the exemption amount annually. The percentage must fall between 50% and 200% of the state Circuit Breaker tax credit received by taxpayers. Upon recommendation from the Board of Assessors, the Select Board voted for a 100% exemption.
Here’s how the Administrative Assessor explained the formula:
Total amount received by the eight households ÷ Original tax rate = Dollar amount of value to be exempted (and compensated for via a higher residential tax rate)
$8,221 ÷ .01781 = $461,595
He noted that the exact amount each taxpayer received from the state will be calculated and the exempted amount of value will be deducted from each property tax bill.
The Assessors have posted the application form, due annually by August 31st, on the town website.
An Underutilized Resource
How much can seniors save with this exemption? For a rough estimate, we can see that dividing 8 by $461,595 equals $57,699–which, when multiplied by .01781, shaves $1,027 off the recipient’s tax bill. Which begs the question: why aren’t more homeowners participating?
One likely answer is that the program is very new, and few residents know about it.
Another reason could be privacy concerns. The application requires a lot of personal financial information that some people may not be comfortable sharing. By law, exemption applications are not public documents and assessors cannot share residents’ personal information. However, a fact of small-town life is that many long-term residents know each other. For some, revealing so much of their financial lives isn’t worth the savings.
To be fair, no one should be surprised by the breadth of financial information required for a means-tested exemption, particularly since other taxpayers in town subsidize successful applicants. Notably, getting this exemption doesn't preclude residents from applying for and receiving other exemptions.
A consequence of the means-tested exemption is that receiving one may prevent a taxpayer from obtaining another the following year if the amount of tax paid no longer exceeds 10% of annual income. This may happen more often now that the state has increased the maximum credit to $2,590. Seniors considering this exemption should do the math to ensure they receive the greatest benefit possible.
