Deferring Taxes for Over 65 Homeowners
You may be familiar with the Over 65 exemption, but are you aware you can actually defer payment of all taxes if you're a homeowner over the age of 65 and filed for an exemption? While it sounds like a great deal, there is a catch.

The fact is if you are over 65 and filed for the Over 65 exemption, you can elect not to pay any property taxes whatsoever. While this may save you thousands each year, eventually, just as Scotland Yard always gets the criminal, the county always gets its money.

When the house transfers ownership to a new homeowner or a surviving heir to the over 65 homeowner without accumulated taxes being paid, the county can then come back and charge the new owner all the back taxes, which have been accruing at 8% while the over 65 homeowner elected not to pay taxes. The money "saved" by the over 65 homeowner could come back and haunt the new homeowners.

Let's assume the over 65 homeowner is being taxed for a home capped at a $50,000 value and the tax rate is three percent. Each year, the homeowner is electing to forgo the $1,500 tax fee for five years. Each year the homeowner elects not to pay taxes, the taxes due are increasing by eight percent. For the first year, the value is $1,620 ($1,500 + eight percent). The next year, $1,500 is added to the previous year and charged eight percent, for a total of $3,369.60. After five years, the new homeowner is responsible for all the back taxes and interest, for a total of $9,500. This is either due on receipt, a payment plan is agreed upon (with more interest and penalties applied) or a tax sale is done by the homeowners to raise money for the back taxes. Of course, the $1,500 could also be invested each year at a rate of return greater than eight percent and the money taken from the investment proceeds.

If you or your parents are over 65, contact O'Connor & Associates to learn more about the Over 65 exemption and how we can help you take advantage of this tax savings.

Questions?
E-mail O'Connor & Associates, or call 1-800-856-REAL.


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