Wednesday, March 19, 2014

Revisiting the residential exemption

If you live in the property you own in Somerville, you may already be eligible for one of the highest residential exemptions in the state and a new proposal by Mayor Curtatone could give Somerville the highest residential exemption in Massachusetts. (See below for eligibility requirements.)

When people talk about residential exemptions, they often talk about a percentage off your tax bill, but that’s only half the story. The residential exemption is actually a percentage off the average residential value. How does that work? This year, the average residential property value in Somerville was $502,248, so that’s the number you take 30% from to find the residential exemption. If you take 30% of $502,248, that’s $150,674, so if you qualify for the residential exemption you get taxed as if your property was worth about $150,000 less than it actually is.

Mayor Curtatone’s proposal would raise the exemption rate to 35%. If that rate was in effect this year the residential exemption amount would be $175,787, or about $25,000 more than the current exemption. The residential tax rate this year is $12.66 per $1,000 of value, so being taxed on a value that is more than $25,000 lower would mean additional savings for homeowners.  

How much savings? Tax bills are complicated, so the savings would be different for each property, but here’s a chart that shows how the tax bill changed for the average value, owner-occupied property of each property type from this year (fiscal year 2014) versus last year (fiscal year 2013) if the owner took the 30% residential exemption. It also shows how those bills would have changed had a 35% exemption been in place. So, for example, the average two-family, owner-occupied that took the 30% exemption home saw an increase of $39 on their tax bills this year (this is just the average! Individual bills can vary depending on the property value). Had they been able to take the 35% exemption instead of the 30% exemption, their bill would have decreased $118 for the year. That’s a $157 savings for the year.

Property Type
Average FY14 Value
Tax Change From FY13 at 30%
Tax Change From FY13 at 35%
Savings With Increase
Condominium
$338,000
-$88
-$333
$245
Single Family
$467,300
$293
$107
$186
Two Family
$529,400
$39
-$118
$157
Three Family
$598,100
$53
-$73
$126
4-8 Family
$772,600
-$42
-$89
$47

So, how does the residential exemption get changed? First, a proposal needs to be made to change the rate. That already happened last week when Mayor Curtatone asked to the Board of Aldermen to change the residential exemption to 35%. The Board of Aldermen would then need to approve submitting a home rule petition** to the State Legislature for approval. If approved at the state level, the new residential exemption would become 35%.

In the meantime, you can still file for the 30% residential exemption (and possibly others, if you qualify) for FY14. The deadline to apply for exemptions is April 1, 2014 by 4:30 p.m.

* To qualify for the residential exemption you must own and occupy the property
on January 1, 2013. Massachusetts laws stipulate that property owners have to pay a tax of at least 10% of the full tax bill. For low-value properties that might mean the residential exemption would be limited.
** Cities and towns can submit home rule petitions to existing laws to be granted certain powers not generally under municipal control.

*** Fiscal years run from July 1 – June 30. Fiscal Year 2015 begins July 1, 2014.

4 comments:

  1. If a Somerville property owner applied for and was granted a residential exemption in 2013, does it automatically carry over in subsequent years, or does the owner have to reapply annually?

    ReplyDelete
    Replies
    1. The Assessor's Office sends out forms every few years to reverify owner occupied properties, so if you haven't received anything you should be all set. If you want to double check, though, you can call the Assessor's Office at 617-625-6600 ext. 3100.

      Delete
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