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New State Property Tax Loans Can Help Seniors Age in Place

New State Property Tax Loans Can Help Seniors Age in Place
Written by Publishing Team

Maine’s new property tax deferral program for seniors began January 5. The program is designed to help those over 65 or with permanent disabilities stay in their homes by offering lifelong loans to cover the cost of municipal property taxes. Lifetime loans can be deferred to the homeowner, and paid off from the homeowner’s property.

The program is the result of legislation signed into law by Governor Janet Mills on July 19, 2021. The primary sponsor of the bill was Senator Donna Bailey, D. Sacco. The bill was modeled on a similar program from 1989 that was suspended during the 1991 recession.

In a press release issued by her office, Governor Mills said, “Older Mainers and people with disabilities deserve to live and grow old in the comfort of their own home without worrying that they will lose them because they cannot afford property taxes.”

Property taxes can be one of the biggest annual bills that Maine residents face. The most recent comparison available from Maine Revenue Services using numbers from 2019 municipal compliance and 2021 state assessment puts the Lincoln County average equivalent tax rate at 10.36, or $1,036 per $100,000 assessment.

Based on that rate, a $200,000 home in Lincoln County owes an average of $2,072 in property taxes.

Property taxes are set by towns based on their individual financing requirements, and fluctuate annually. In 2021, tax rates ranged from 4.025 in south Bristol to 20.1 in Somerville.

Many Lincoln County seniors on fixed incomes still live in inherited family homes with property that may be of much higher value. Some face property tax bills of $5,000 or more annually.

According to the Social Security Administration’s Old Age, Survival, and Disability Insurance Program, in December 2020, there were 9,375 Social Security recipients over the age of 65 in Lincoln County, earning an average of $1,483.

Given an extrapolated annual income of $17,796, property taxes could easily account for more than a quarter of the annual income of some retirees.

One of the main benefits of the State Property Tax Deferral Program is that it does not negatively affect the taxes levied on local municipalities. The much-needed taxes that help fund schools, roads and infrastructure are still being paid in full on schedule.

But the program could keep big money for low-income seniors — potentially improving their chances of aging in place, a common goal for many seniors residing in Maine.

In the press release, Kirsten Figueroa, Commissioner for Administrative and Financial Services, said the program “(allows) people to stay at home without disrupting local budgets.”

Eligibility for the program is limited to owner-occupied primary residences who are 65 years of age or older and/or permanently disabled, earning less than $40,000 annually, with less than $50,000 liquid assets (or less than $75,000 if they apply jointly). Additionally, there can be no restrictions on the homeowner’s ability to sell property or obtain loans, and there must be home exemption.

Homestead exemptions are reductions of up to $25,000 in the value of a home for property tax purposes. You can apply for it through the municipality in which the house is located. The home exemption can relate to any land or apartment building, including mobile homes, that has been the homeowner’s permanent residence for at least 12 months.

According to the details of the Government Property Tax Deferral Program, properties eligible for the deferment include both the main residence and up to 10 contiguous acres. If the property is located in a multi-unit building, the qualifying property is the portion of the building used as the main residence plus a percentage of the common areas and the land on which the building is located.

Eligible homeowners can apply for a deferment until April 1 by submitting applications to the municipality in which they live. The municipality will work directly with Maine Revenue Services to process applications and payments. Once approved, the resident does not need to re-apply. The deferment can remain in effect as long as there are no disqualifying changes in circumstances.

Maine Revenue Services will place a lien on the dwelling as security for taxes paid plus interest. According to Kelsey Goldsmith, director of communications for the Department of Administrative and Financial Services, the interest rate for the state property tax deferral program is legally set at 1% less than the standard interest rate for revenue services in Maine.

That rate is 5% for 2022, which makes the interest rate for the property tax program 4% for the current year. By comparison, the Maine State Credit Union’s Home Ownership Line of Credit APR is listed “as low as 3.25%,” but the rate is variable, and terms apply.

In an email, Goldsmith said: “The State Property Tax Deferral Program is intended to serve as a lifeline for those who are older or disabled who have no other choice to pay their property taxes, and who will be on the verge of losing their home. Due to the program’s strict income and liquid asset limits, as well as If participants may already be left behind, program eligibles may not qualify for standard privately available lending products.”

Participating homeowners will receive annual notice of the current balance, and deferred taxes plus interest must be paid when participation in the program ends, whether paid by the homeowner or by the homeowner’s property.

Situations that result in the loan being repaid include the homeowner’s death, the home’s sale, a change of homeowner’s primary residence (except for health reasons), removal of property from the program and, in the case of a mobile or floating home, removal of the property from Maine.

Lincoln County Commissioner Bill Blodgett said he doesn’t think many people who could benefit from the program are aware of it. He said he would like to see towns play a role in informing residents who might be eligible.

“It’s an opportunity for people with very limited assets to continue living in their own homes,” he said.

The program is funded by the allocation of $3.5 million from the US Rescue Plan through the Maine Government’s Janet Mills Jobs and Recovery Plan. Loan repayment when the property is sold or becomes part of a property will be used to maintain the program indefinitely.

Applications can be obtained from maine.gov.

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