Do you qualify for a property tax exemption?

This is the time of year when most of us are thinking about our taxes – what we may owe or how much we may get back, as well as saving money after paying our taxes. I am in no way a tax expert and encourage you to speak to your own investment advisor or tax professional. That said, in the next few columns, I hope to give you some ideas for ways to save money in regards to your housing expenses.

 Today, we will discuss several property tax exemptions available to home and property owners in Grays Harbor County.

Before we get too much further, I’d like to introduce you to the Grays Harbor County’s auditor’s website, which is detailed and helpful – graysharbor.us/government/ assessor. In addition, Grays Harbor County Assessor Dan Lindgren invites the public to call his office with questions at (360) 249-4121.   

Destroyed property

If, sadly, your home suffered significant damage —perhaps by storm, flood or fire – and consequently its value was reduced by more than 20 percent, you may be eligible for a reduction in property value, leading to a lower tax assessment. (Of course, if the property was destroyed by the owner on purpose, the tax break does not apply.) 

Simply fill out an online form or call the Assessor’s Office to request an application within three years of the date of destruction or reduction in value. From there the Assessor will calculate the new assessed value as well as the amount of the reduction for abatement of taxes and then let the taxpayer know of the determination. (An amount is figured depending on how many days of the year the property was damaged, reducing its worth.) 

Physical improvement exemption

On the flip side, if you are planning to make a physical improvement to your home, it’s possible you may be eligible for a physical improvement exemption. This exemption for a single-family dwelling entitles you to an exemption on a portion of your property taxes for three years! This is very important if you are considering larger renovations and home improvements.

In 1972, the legislature passed a law giving tax relief to those who embark on qualified home-improvement projects.

This is how it works: Before beginning your remodel, but after you have secured your building permit, you fill out a very simple one-page form from the County Assessor’s Office in Montesano. (Take note: the timing is critical; you must call the office before you start your project to be accepted into the program because of the way the law is written.)

“Physical improvement” means any addition, improvement, remodel, renovation, or structural enhancement that will add to the value or condition of an existing dwelling. It needs to be a permanent change that increases the value of the dwelling. This includes the addition of a garage, carport, patio, deck or other improvements attached to and compatible with the home.

It does not, however, include swimming pools, landscaping, small outbuildings, fences, barns, sheds, shops, or temporary structures.

Once you’ve been accepted into the program, the Assessor’s Office establishes the before-the-improvement value of your home. When the improvements are complete your home is re-valued.

Now here comes the good part – the difference between the value before the improvements and the value after the improvement is the amount exempted. This exemption is limited to 30 percent of your home’s value before the improvement.

For example, say you’re going to build a $75,000 addition onto your $225,000 (before-improvement) house. Using the formula, 30 percent of $225,00 is $67,500. This would be the amount exempted, leaving $232,500 as your new assessment for three years, instead of $300,000!

So, it’s certainly worth looking into if you’re planning a remodeling project this summer. And do it soon, because it’s important that you get your permit and fill out the forms before you start your project.

Senior Citizens and People with Disabilities

The State of Washington has two property tax relief programs for senior citizens and people with disabilities – the first is a property tax exemption; the second is a property tax deferral program. There is information about each program on the Grays Harbor County website.

The tax exemption program offers two benefits for eligible senior citizens and people with disabilities.

First, depending on income, the homeowner does not have to pay the excess levies or part 2 of the state school levy, and depending on the income, may not need to pay a portion of the regular levy. This could lead to a significant reduction in annual property tax obligation.

Second, the exemption “freezes” the taxable value of the residence the first year a person qualifies. This means that the levies will be based on the frozen value not the market value (which tends to go up). This is a benefit that doesn’t have an immediate effect on your property tax annual cost, but levels out your cost over time and can especially help those on fixed incomes manage their housing budget. Qualifications are based on age (61 or older) or disability, ownership, occupancy and income.

These exemptions are available for the primary residence and up to one acre of land that it sits on. (That amount can include more acreage depending on local zoning and land use regulations.)

You must live at least six months a year in the home and have it be your primary residence the year before the taxes are due. (In other words, vacation homes are not eligible.) However, your home is still considered a primary residence even if you are temporarily living in a hospital, nursing home, boarding home or adult family home.

 For disabled people, the Assessor’s Office accepts the Social Security Administration’s “date of disability” or a physician’s written statement as proof of disability.

For both senior citizens and disabled people, the maximum disposable income allowed for eligibility in Grays Harbor County is between $30,300 and $40,400, depending on which level of exemption someone qualifies for.

To calculate the maximum disposable income, first ALL forms of income must be added together. However, from that you are allowed to deduct out-of-pocket expenses for prescription drugs, in home health care, attendant care, special furniture or equipment or furniture needed, nursing home care, premiums for Medicare, long-term care insurance, etc.

Again, talk to the folks at the Assessor’s Office if you think you might be eligible.

Tax Deferral Program

 A closely related tax-relief measure, the property tax deferral program, is also available for people with disabilities and senior citizens that meet household income thresholds.

Under this program, the state-paid property taxes become a lien against the property in favor of the state and a 5 percent annual interest is charged until paid.

This isn’t a program that would be helpful in all situations and does come at a cost (the accrued interest), but for some circumstances, it might be a welcome relief.

Other tax exemption programs

Check out the county’s website for these and other property tax exemption programs. For example, as a way to encourage commercial forestry in Washington state, a landowner can choose to have their land considered as forest land. The land must be used primarily for growing and harvesting timber and consist of a single parcel or contiguous parcels of at least five acres. There are many other requirements to qualify.

 Another category for property tax exemptions is the “Open Space Taxation Act,” which allows property owners to have their open space, farm and agricultural and timber lands valued at their current use rather than at their highest and best use. This law, enacted in 1970, calls for three classifications: open space, farm and agricultural land and timber land. Each has specific requirements.

Eric Bjella is the executive director of NeighborWorks of Grays Harbor; a nonprofit organization committed to creating safe and affordable housing opportunities for all residents of Grays Harbor County. For questions about home repair, housing counseling, homebuyer education and financing, call 360-533-7828, listen to the extension picks that will best help you and leave a callback name and number.