Disabled Property Taxes

[NewMexicoCowboy]

Hi everybody,
How do property taxes work on homes that disabled people in Texas own.I heard there is a property tax break for the disabled such as myself in the great state of Texas.I am not familiar with how property taxes work so thats why I am asking.My parents are thinking of buying me a home someday since I cant work because of my life-threatening disability.Could this tax break reduce my property taxes by a lot.I am not a veteran.Sorry if this has been asked before.I cant afford to hire accountant so I am trying to figure out what I can online.I have looked this up but I could not make sense of it.I became disabled in college.Thanks in advance.I have not decided on a home budget yet for my starter home.

[Trainwreck20]

I don't know the details, but at the very least you get the same breaks as a retired person before you reach the age of 65. There may be other benefits, I am not sure.

[NewMexicoCowboy]

Originally Posted by Trainwreck20

I don't know the details, but at the very least you get the same breaks as a retired person before you reach the age of 65. There may be other benefits, I am not sure.

Okay thank you very much Trainwreck20.

[Trainwreck20]

I assume you are not a disabled veteran? I think they get a huge waiver - maybe all? - on their property taxes.

As an aside, if you have no dependents or other people that you are looking to leave an inheritance to, you can opt to defer your taxes. The accumulated taxes accrue with interest (5%) but are not due until you sell the property or die. You normally can't do this until you are 65, but if you qualify as disabled, you can start deferring taxes regardless of age.

How do I qualify for a disabled person's exemption?

You are eligible if you qualify to receive disability benefits under the Federal Old-Age, Survivors and Disability Insurance Program administered by the Social Security Administration. Disability benefits from any other program do not automatically qualify you. To prove your eligibility, you may need to provide the appraisal district with information on your disability. Contact your local appraisal district for information on what documents are required to prove eligibility.

Deferred Property Tax Payments

Texans may postpone paying current and delinquent property taxes on their homes by signing a tax deferral affidavit at their appraisal district office if they are:

• age 65 or older;

• disabled as defined by law;

• qualified disabled veterans, their unmarried surviving spouses, or their unmarried children under age 18, if no surviving spouse; or

• unmarried surviving spouses of U.S. armed service members killed on active duty and their unmarried children under age 18.

[NewMexicoCowboy]

Originally Posted by Trainwreck20

I assume you are not a disabled veteran? I think they get a huge waiver - maybe all? - on their property taxes.

As an aside, if you have no dependents or other people that you are looking to leave an inheritance to, you can opt to defer your taxes. The accumulated taxes accrue with interest (5%) but are not due until you sell the property or die. You normally can't do this until you are 65, but if you qualify as disabled, you can start deferring taxes regardless of age.

I am not a veteran but I almost was because I was going to join the Marines after college to be a officer but I became disabled in college so I didnt.I am on social security disability currently.I have no dependents because I am single and unmarried. Right now the plan is to leave my estate to the church and possibly charity.

[Trainwreck20]

Originally Posted by NewMexicoCowboy

I am not a veteran but I almost was because I was going to join the Marines after college to be a officer but I became disabled in college so I didnt.I am on social security disability currently.I have no dependents because I am single and unmarried. Right now the plan is to leave my estate to the church and possibly charity.

Deferring taxes at a young age has pros and cons, but worth looking at. I picked a random property in Paris, Texas, which really isn't relevant other than I took a property with a current value of $131,000, a total superficial tax rate of 1.817, actual taxes with exemptions of $147 (wtf?), and taxes w/o exemptions at $2,378. The exemptions include homestead and homestead cap effects, but they do not show all exemptions, so likely something else there?

The property was worth 32,330 in 2012, so it has appreciated at ~12.5% per year, although the bulk of that was more recent - and also the taxes were moderated by the homestead exemption.

So, if you bought that house today for $131k and your effective tax rate was somewhere around 1.6 (1.817 minus disability and HSE), you would owe ~$2,100 the first year. Tax rates are actually fairly flat over time (and your school tax is frozen), but assume the effective rate goes up ~1% a year and your appraisal averages 4% per year all while paying 5% interest into your deferred tax bill. Finally, assume some random age - 40 years for this.

When you are 60, you will owe ~$72k in back taxes (including $28k in interest), but your house will be worth around $287k. So, if you did decided to sell, you would still be up over $200k.

When you are 80, it would be $277k ($180k in interest) in taxes but a home worth $630k.

So, under that scenario, you would never be 'underwater' but you will pay a lot in interest.

Now, to be devil's advocate, assume that effective taxes increase 2% a year and appreciation is only 2% a year, then you end up owing more than the house is worth when you are 78 or so and underwater by about $120k when you are 86. But, hey, not your problem unless you move .

If you manage to invest the equivalent of your yearly tax bill every year and make 5%, you are breaking even by not paying taxes .

[NewMexicoCowboy]

Originally Posted by Trainwreck20

Deferring taxes at a young age has pros and cons, but worth looking at. I picked a random property in Paris, Texas, which really isn't relevant other than I took a property with a current value of $131,000, a total superficial tax rate of 1.817, actual taxes with exemptions of $147 (wtf?), and taxes w/o exemptions at $2,378. The exemptions include homestead and homestead cap effects, but they do not show all exemptions, so likely something else there?

The property was worth 32,330 in 2012, so it has appreciated at ~12.5% per year, although the bulk of that was more recent - and also the taxes were moderated by the homestead exemption.

So, if you bought that house today for $131k and your effective tax rate was somewhere around 1.6 (1.817 minus disability and HSE), you would owe ~$2,100 the first year. Tax rates are actually fairly flat over time (and your school tax is frozen), but assume the effective rate goes up ~1% a year and your appraisal averages 4% per year all while paying 5% interest into your deferred tax bill. Finally, assume some random age - 40 years for this.

When you are 60, you will owe ~$72k in back taxes (including $28k in interest), but your house will be worth around $287k. So, if you did decided to sell, you would still be up over $200k.

When you are 80, it would be $277k ($180k in interest) in taxes but a home worth $630k.

So, under that scenario, you would never be 'underwater' but you will pay a lot in interest.

Now, to be devil's advocate, assume that effective taxes increase 2% a year and appreciation is only 2% a year, then you end up owing more than the house is worth when you are 78 or so and underwater by about $120k when you are 86. But, hey, not your problem unless you move .

If you manage to invest the equivalent of your yearly tax bill every year and make 5%, you are breaking even by not paying taxes .

Oh okay thanks.I think I could possibly make 7 percent inflation-adjusted because thats whats the S and P 500 has averaged roughly for its history so deferring could be a safe move if I invested the annual tax bill amount into a index fund.I would like to have the option to move so I may not or prolly wont defer taxes.

[Trainwreck20]

Originally Posted by NewMexicoCowboy

Oh okay thanks.I think I could possibly make 7 percent inflation-adjusted because thats whats the S and P 500 has averaged roughly for its history so deferring could be a safe move if I invested the annual tax bill amount into a index fund.I would like to have the option to move so I may not or prolly wont defer taxes.

Yeah, the real intent is for elderly people to not have to pay taxes; however, I have an intellectually disabled daughter that will likely outlive both of us parents. We will have a special needs managed trust set up, but she will likely never have children and will not likely be inclined or able to move. When and if she inherits our house, we are considering having it go into a 'deferred' status via the trust managers. The house will be heavily taxed otherwise but that will limit her risks to losing a house via non-payment of taxes. In any case, very niche situation there .

If you have the wherewithal to invest at 5% and make money, it is better to not defer taxes. The other possible situation is people that cannot seem save money from day to day.