The potential benefits of senior property tax deferral programs

Property taxes are rising dramatically across the country, and that reality has the potential to hit seniors living on a fixed income hardest of all. On top of that, keeping up with property tax and insurance costs are key requirements to keep any mortgage in good standing, whether it’s a forward or reverse loan.

Some localities offer programs that allow older homeowners, specifically, to defer the payment of their property taxes to a later date. It’s not a waiver, but it could provide relief for low-income homeowners who are older and struggling to make ends meet.

This is according to Alicia Munnell, senior adviser of the Center for Retirement Research at Boston College, in a new op-ed for MarketWatch.

“I have always been a great fan of thinking about the house as a retirement asset and about ways people can access the equity in their home to support themselves in retirement,” she wrote.

“The conventional approaches involve downsizing to a cheaper home, which requires retirees to move, or taking out a reverse mortgage, which allows people to stay in place but involves substantial complexity and upfront fees.”

Property tax deferral programs, however, constitute a “far better option” than either of these, she said.

Adam Scanlon, a lawmaker in the Massachusetts House of Representatives, recently submitted a bill to the legislature that seeks to establish a pilot property tax deferral program for the state’s older homeowners.

While some localities offer these programs, participation accounts for only 702 residents as of fiscal year 2022, according to data cited by Munnell from multiple sources. This is due to three primary reasons, she posits.

“First, most homeowners are not eligible,” Munnell said. “Second, eligible homeowners are not aware of the program (since only wealthy communities tend to publicize their program) and often confuse it with other tax credit and exemption programs.

“Third, homeowners who are eligible and aware often do not know how to apply, are concerned about a stigma attached to an income-tested program, or hesitate to place a lien on their home.”

Under the new proposal in Massachusetts, deferring property taxes would save an older homeowner up to $4,755 a year, she said. Deferrals can be chosen in different terms (monthly or yearly), and uptake of the pilot could help determine a path forward for the rest of the state.

As of 2023, 12 states offered property tax deferral programs, according to a list compiled by MoneyTalksNews. But experts typically advise that those considering entering such a program weigh the potential pros and cons, since deferral requires repayment at a later date.

Some states are looking into an outright ban on property taxes. Other local officials, citing concerns from older residents about their property tax bill, have also recommended the consideration of a reverse mortgage for those who may qualify.